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Contact Jim: jdipeso@rep.org (253) 740-2066 / 2008 Archive / 2007 Archive / 2006 Archive / 2005 Archive
What High Prices Are Saying
April 23, 2008
When restaurant owners are posting lookouts at Costco to snatch up hard-to-get rice shipments, it’s clear that the run-up in the prices of life’s essentials has hit home.
The rising costs of basic food staples – wheat, rice, and corn, for example – are prompting grumbles at home and riots abroad. Since late 2006, the per-ton price of rice has more than doubled. Likewise for wheat. Same story for corn.
The rice market is so discombobulated that Costco and other stores are reporting runs on rice. In the Seattle area, for example, restaurants serving Asian cuisines centered on rice and lots of it are elbowing each other to snap up bags of high-priced rice as soon as they hit the retail floor.
Many fingers are pointing at the biofuels boom as the cause of the price shock, but the story is far more complex. A significant reason for the food price run-up is the oil price run-up. Oil and oil-based products are deeply embedded in food production systems, from soil preparation to the supermarket display case.
Oil is touching $120 per barrel. A year ago, the price of crude was hovering in the $60-per-barrel range. At the time, $60 oil prompted angry accusations of gouging. Only 12 months later, such a price seems a quaint artifact of simpler times.
Prices are more than the posted cost of acquiring goods and services. Prices contain information. One of the messages emanating from high prices of food and energy is that energy insecurity, food insecurity, climate change, poverty in developing nations, and resource depletion must be attacked as an interrelated whole.
These problems are not intractable. A new McKinsey Global Institute study, for example, shows that the U.S. could cut its projected 2030 greenhouse emissions by up to 50 percent through measures costing no more than $50 per ton of carbon dioxide. Such measures include improving energy efficiency – the foundation of any sensible energy/climate policy – moving to second-generation biofuels that are not derived from food crops, stepping up wind generation, and replanting forests.
The cost estimates assume that action begins now. If we wait until 2015, the costs go up.
The sooner we start dealing with global resource problems, the greater the odds that we can solve them without undue disruption.
It’s something to think about when an anxious restaurant owner grabs that last bag of rice out of your hands.
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