Chapter 2. Tell Me the Oil Price

Food and energy markets have long been intertwined. When oil and natural gas prices increase, farmers face higher prices for fuel and fertilizer, so crop and livestock production costs increase. Higher fuel prices also increase the costs of processing and transporting food to final consumers. These higher costs eventually translate into higher food prices.

The effects of energy prices on food production and transportation costs are hardly new. What has changed is that oil prices now also have a major impact on the demand for farm products because of the growing biofuel industry. High oil prices make biofuel production more profitable, and this encourages the industry to expand. With current technologies, more ...

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