High Food Prices
"Rush to biofuels playing role in hunger and higher prices." (International Herald and Tribune. 7 April 2011. Elisabeth Rosenthal.) In her article Ms Rosenthal states:
"The starchy cassava plant has long been an ingredient in everything from tapioca pudding and ice cream to paper and animal feed.
"But last year, 98% of cassava chips exported from Thailand, the world's largest cassava exporter, went to just one place and for just one purpose: to China to make biofuel. Driven by new demand, Thai exports of cassava chips have increased nearly fourfold since 2008, and the price of cassava has roughly doubled." It can be seen that increased demand has led to an increase in price which has signalled to producers in Thailand to supply more cassava in the market.
She then goes on to write "Each year an ever larger portion of the world's crops, from cassava to corn to sugar to palm oil, is being diverted for biofuels as developed countries laws mandating greater use of non-fossil fuels and emerging powerhouses like China seek new sources of energy ....... But many experts are calling on countries to scale back their headlong rush in to green fuel development, arguing that ambitious biofuel targets and mediocre harvests of some crucial crops is contributing to high prices, hunger and political instability".
Define the terms:
Using an appropriate diagram, show how increased demand from China and increased supply by Thailand of cassava has caused changes in price in the market for cassava chips.
Explain how the diversion of traditional food products, such as cassava and palm oil, to biofuel production can lead to high food prices, hunger and possible political instability in a country such as Egypt.
Using your knowledge of economics and of the real world, evaluate the decision by governments in developed countries to move to new sources of energy in the form of green fuel development.