Commentary: High energy and food prices force global change

by Ron Sterk
Share This:

The effects of record high energy and commodity prices have been felt by many, but indications are the pain is bringing about much-needed change.

The United Nations and others continue to blame soaring food prices on biofuels policies in the United States and Europe while the Bush Administration continues to blame strong global demand and record high energy prices for most of the rise. Blame for inflated agricultural and energy prices on U.S. and world futures markets also has been aimed at huge speculative commodity funds.

On the energy front, automotive giant General Motors Corp. on June 3 said it would change its focus from gas-hungry trucks and SUVs to more energy efficient cars, including a new small car that would get 45 miles per gallon. The move includes closing four factories, cutting 10,000 jobs and shedding the Hummer division.

GM’s moves were said to be based on shifting consumer demand for smaller, more efficient vehicles. But it could signal a more significant change across the auto industry to more fuel efficient cars and trucks, a change that could have much greater impact than adding ethanol and biodiesel supplies to offset or reduce rising liquid fuel consumption.

On June 4 the Malaysian government said that in August it would begin pricing energy on world market values and eliminate price controls (subsidies) that kept fuel prices artificially low, while adding taxes on power producers and palm oil processors. The highly controversial move follows similar changes in India and Indonesia.

Subsidized fuel prices in Asia have been blamed in part for soaring energy demand because prices are kept artificially low at the consumer level. However, China, the fastest growing energy user, still subsidizes fuel prices.

Meanwhile, on the commodity pricing front, the Commodity Futures Trading Commission, which regulates futures and options trading in the U.S., said June 3 it would increase its oversight of futures trading, withdraw a proposal to increase speculative position limits on some agricultural futures and review its policy on granting exemptions to limits on commodity index trading.

While debatable, some have contended huge amounts of money from index funds have inflated futures prices to the point they are out of line with actual cash values. Some futures prices dropped on the C.F.T.C. news.

The events in the past week have offered a glimmer of hope that changes affecting commodity pricing and consumption were beginning. Although such major changes will be slower in coming, hopefully they will make a long-lasting and positive impact on food and energy prices.

Comment on this Article
We welcome your thoughtful comments. Please comply with our Community rules.

The views expressed in the comments section of Food Business News do not reflect those of Food Business News or its parent company, Sosland Publishing Co., Kansas City, Mo. Concern regarding a specific comment may be registered with the Editor by clicking the Report Abuse link.