Impact On Developing Countries
Demand for fuel in rich countries is now competing against demand for food in poor countries. The increase in world grain consumption in 2006 happened due to the increase in consumption for fuel, not human consumption. The grain required to fill a 25 US gallons (95 L) fuel tank with ethanol will feed one person for a year.
Several factors combine to make recent grain and oilseed price increases impact poor countries more:
- Poor people buy more grains (e.g. wheat), and are more exposed to grain price changes.
- Poor people spend a higher portion of their income on food, so increasing food prices influence them more.
- Aid organizations which buy food and send it to poor countries see more need when prices go up but are able to buy less food on the same budget.
The impact is not all negative. The Food and Agriculture Organization (FAO) recognizes the potential opportunities that the growing biofuel market offers to small farmers and aquaculturers around the world and has recommended small-scale financing to help farmers in poor countries produce local biofuel.
On the other hand, poor countries that do substantial farming have increased profits due to biofuels. If vegetable oil prices double, the profit margin could more than double. In the past rich countries have been dumping subsidized grains at below cost prices into poor countries and hurting the local farming industries. With biofuels using grains the rich countries no longer have grain surpluses to get rid of. Farming in poor countries is seeing healthier profit margins and expanding.
Interviews with local peasants in southern Ecuador provide strong anecdotal evidence that the high price of corn is encouraging the burning of tropical forests. The destruction of tropical forests now account for 20% of all greenhouse gas emmisons.
Read more about this topic: Food Vs. Fuel
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