Does Biofuels cost outweighs benefit? (Two)
Worldwide biofuels is now accounted for almost half of the demand for vegetable oils. The fast conversion rate from fossil fuel to biofuels has increased the proportion usage of edible oil to biofuels. The rise is from virtually nothing a few years ago to 7 % today and growing at a fast rate. This has dented into supply of world cooking oil. Naturally, the law of demand and supply gather force and push the price of vegetable to a historical high.
Palm oil price has jumped 200 % for the last several months. A bottle of 75 ml. palm or Soya- bean cooking oil costing only Baths 18 (US$ 0.50) last year has shot up to Baths 45 or US$ 1.25 today. Cooking oil is a commodity controlled by the internal trade in Thailand which means any price increase must have the approval of the regulating department. The Internal trade has allowed the price to gradually rise to Baths 50 (US$ 1.5) by the end of 2008 or face supply shortage.
Not only Thailand is suffering from the oil hike. Across Southeast Asia, families have been hoarding palm oil in view of price rise. This has further aggravated price increases.
Smugglers have been bidding up prices from producing countries of Thailand, Malaysia and Indonesia to Laos, Cambodia, China and Singapore. Edible oil is the fastest food price raised over the New Year.
In Asia largest slum of Mumbai, India, every single drop of cooking oil is a commodity now under ration. In some countries, desperation is taking hold. Thailand slapped an export ban and issued an import of 30,000 metric tons palm oil over the next few months (February – April 2008). A stampede of cooking oil buyers in Chongqing, China, recently left three people dead and 31 injured. Even EU and United States are feeling the pinch. From Rome to Indiana, bakeries are fretting over higher oil cost.
Soaring cooking oil price in world market will also affect other food price in a chain reaction. Oil is used in animal feed for fowls, boars, fish and shrimps. Huge demand for biofuels had created tension not only between human and vehicles but animals as well. Thai Chamber of Commerce had come out to voice their concern for the shortage and high price of vegetable oil for animal feed last week. They have predicted a price war if nothing drastic is done to correct the situation immediately.
It takes no economist or Guru to predict that other food prices will rise as well in foreseeable future. This means higher prices in the grocery store from the developing world to the supermarkets in the west. We have not seen any steep increases in food prices in street stall just yet. There may be worse inflation to come. So sit tight and fasten our seatbelts.
The growth of biodiesel has induced farmers and plantation companies to clear hundreds of thousands of hectares of land to replant oil plants. Palm oil land covers 12 % of the entire land area of Malaysia and even greater acreage in nearby Indonesia. Thailand is pondering to increase palm plantation substantially.
American farmers have also been planting more corn and less soy because of the demand for corn-based ethanol. American soybean acreage plunged 20 % last year, producing a significant drop in soybean oil output and stock. Chinese farmers too cut back soybean acreage, as urban sprawl to covered prime farmland for the most desired grain.
This has caused global environmental concerns. European conservationists have been warning of the danger. Falling huge area of tropical forests to pave ways for palm oil plantation will destroy habitat for rare animal species. It will also release green house gases and make worse global warming. Pushing GMO corn production steeply to the verge without recourse may result in a fall from the cliff and cause environmental disaster.
The multiple conflicts of edible oil, animal feed and energy for vegetable oil has just flared up and will not easily subside. The policy makers and the experts are the ones that have the say on the matter and I plead to them here that they will exercise their wisdom to the good of all mankind.