Trinidad Bulk Traders Limited

 

What is to blame - Biofuels or Petroleum?

Biofuels seem to have become the easiest scapegoat for rising food prices. However, this argument only reflects a superficial glance at the global problem of the rising cost of food. Vital elements have been left out of the equation such as increasing energy costs, increased consumption and climate changes which affect crop production and seasonality (and biofuels seek to slow down incidentally) and especially waning agricultural efforts by many nations such that food production is not keeping pace with population demands.

United Nations Human Rights Commission Report on the Right to Food, Jean Ziegler did indeed raise a valuable point regarding the fact that leaving millions close to starvation in pursuit of energy interests borders on a crime against humanity; however, he also points out that the main problem with the global hunger is the distribution of the food produced worldwide. He posits that enough food is produced internationally to feed the world’s population four times over, yet people continue to starve. This indicates that the world hunger problem and rising food prices has been a problem far longer that the advent of the international biofuel market. To blame the industry would be to prematurely explain away the issue and ignore the more important elements of food price determination. Therefore, it has merely become a fashionable argument to blame biofuels.

Fuel is necessary at every level in the food supply chain from the most basic production and processing to the final transportation and distribution. With the price of oil currently at US$118.90 per barrel, and in danger of crossing the $120.00 mark, the cost of traditional fuels have a heavier hand in determining food prices than the growth of crops for biofuel production ever could because it incurs a cost at every stage from the field to the consumer (farming equipment and machinery in cultivation and harvesting operations, storage and transport of bulk food materials, processing of foods into finished products, storage (inclusive of refrigeration) of finished products and distribution to consumers) .

Further to this, it must be acknowledged that food prices have increased across the board. Proponents of the ‘food side’ of the food vs. fuel argument would like to believe that due to the use of corn as feedstock in the biofuel industry, all food prices have risen (given that corn or its by-products are present in almost every food item). However, this does not explain the drastic price increases and even rationing of non corn-based products, such as rice, which are not used as a biofuel feedstock. This indicates that biofuel production cannot be the biggest determinant of international food prices and that the root of the problem may lie elsewhere (OPEC and gas guzzlers). A more likely actor in price determination may be the change in consumer habits. The global population has increased both in size as well as preferences and consequently, consumption has as well. However, food production has not increased at the same pace which creates issues of supply and demand which will have a deeper effect on price than biofuels ever can.

In Trinidad and Tobago especially, we cannot realistically claim that establishment of an ethanol industry will adversely affect our food prices, since we have no impact on world food prices and we import the majority of our food stocks ANYWAY. From the ever increasing food import bill, it is evident that there is a preference for these foreign food products and consumers cannot be forced into choosing domestic alternatives. Moreover, our ethanol industry would be supplied by sugarcane and therefore not interfere with food prices which are more affected by ethanol producers who use corn as a feedstock. The argument that the high cost of sugarcane production should discourage possible ethanol enthusiasts is imprudent since it does not consider that our own actions to shrink the industry have reversed economies of scale and therefore have driven up those costs and that reopening the industry on a large scale can and would reduce them.

Further to this, some have claimed that directing land into sugarcane production will use up valuable arable land that can be used for food production, yet the majority of agricultural land has already been geared towards alternative uses, placing agricultural diversification very low on the national agenda. In addition, domestic food production is not guaranteed to reduce national food prices, since we may not have the capacity or resources to grow food crops in the required variety and amount to satisfy current domestic consumption patterns.

The prospect of an ethanol industry should not be viewed as negatively as critics have claimed, since this is a new and dynamic field which the Caribbean has the resources to enter. The assertion that the industry is solely dependent on the CBI arrangement is not entirely true since there has been very little support on the part of governments to allow the industry to expand. The biofuel, ethanol, would indeed be beneficial to Caribbean development in that it would bring the region a step closer to total energy security as well as lift it out of its habitual ‘monoculture’ (whether it is agricultural, industrial – petroleum, or service oriented – tourism).

The idea that a Caribbean ethanol industry is not sustainable at this time only holds as long as policy makers fight its development. The industry can surely be a success if the region adopts measures (fuel mandates, switch to flex fuel engines etc.) such as those put in place by Brazil and other big biofuel producers. This would create a partnership between the agricultural and industrial sectors and can lead to extensive diversification of Caribbean economies. Biofuels should indeed be placed on the agenda sooner rather than later in order to cultivate another driver of development within the region.
 

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