Title: How Oil Prices Affect the Price of Food | OilPrice.com
Headings: How Oil Prices Affect the Price of Food
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How Oil Prices Affect the Price of Food
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Content: exploration and production are becoming more costly, and are giving rise to greater environmental risks, while competition for access to new prospective regions is generating increasing geopolitical tensions. According to the International Energy Agency, the rate of world crude oil production reached its peak in 2006. [ IEA 2010a) The IMF has joined a chorus of energy industry analysts in concluding that scarcity and high prices are here to stay. [ IMF 2011a, 2011b]
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A collapse in demand for oil resulting from sharply declining global economic activity could cause oil prices to fall, as happened in late 2008. Indeed, this is a fairly likely possibility. But while it would make oil cheaper, it would not make fuel more affordable to most people. It is theoretically possible for the world to curb oil demand through policies that limit consumption, and it is also conceivable that some unexpected technological breakthrough could rapidly result in a cheap, effective alternative to petroleum. However, these latter two developments are rather improbable. Thus there is no likely scenario in which the services provided by oil will become more affordable within the context of a stable global economy at any time in the foreseeable future. Â
While wealthy consumers are able to absorb incremental increases in food prices, a sudden interruption in the availability of fuel (due to geopolitical events) or a significant gradual curtailment of fossil fuel production (due to the continuing depletion of world hydrocarbon reserves) could lead to a breakdown of the food system at every level, from farmer to processor to distributor to retailer and finally to consumer.