The Oil Palm

The Brussels Biofuels Debate, Part IV: World Bank Weighs In On Food vs. Fuel

Stockpiles of palm oil have experienced the largest increase since 1999, rising more than 21 per cent to 9.5 million tonnes. In the past year, palm oil prices have fallen some 20 per cent, and some analysts have forecast that palm prices could drop even further later in the year.

But in Brussels, activists are making apocalyptic declarations of runaway commodity prices even pointing the finger at the palm oil industry. With a heated debate in the European Parliament over “indirect land use change” (ILUC) (a policy concept that relies on willful ignorance of scientific facts), palm oil has been targeted by anti-biofuel voices both within the EU’s political leadership, and from external voices such as environmental NGOs. At present, Members of the European Parliament are considering a plan that would arbitrarily restrict food-based biofuel sources to less than half of the 10 per cent EU-wide energy mandate for biofuels.

But if the purpose is to pre-empt increases in food prices, European policymakers are likely to do more harm than good. According to a new report, [“Long-Term Drivers of Food Prices”], authors and economists John Baffes and Allen Dennis of the World Bank’s Development Prospects Group and Poverty Reduction and Economic Management Network, crude oil prices are the primary contributor to recent food price spikes experienced in 2007/2008 and most recently in 2011.

In fact, misguided efforts on the part of policymakers such as MEP Corinne Lepage, and environmental activist organisations risk increasing the likelihood of additional crises in the future as development is curtailed and producers are unable to increase supply. Indeed, some of the leading proponents of ILUC have taken to decrying any agriculture (particularly palm oil) development in Africa, a continent that is desperate for development and agricultural growth.

And there is no small amount of irony that the very goal of biofuel mandates, reducing reliance on fossil fuels and diversifying energy resources, should in fact offer a solution to food price volatility.

If leaders and policy experts should take anything away from the World Bank report, it is that it is imperative that there be sufficient supply of agriculture commodities to restrict dangerous fluctuations in food prices – whether they strike in South East Asia, Europe, or Africa. Today, palm oil supplies are stable in Malaysia, but who knows the dangerous impact the EU’s meddling may have on long-term palm oil stocks. MEP Lepage should think again, and base her actions of factual and proven research, rather than on the siren voices of European activist groups.