There has been a sudden growth in the production of biofuels recently. This is being mostly witnessed in relations to those types of biofuels that are being produced to replace the ethanol. Biofuels is one of the renewable source of energy that scientist are advocating for us as regards to the effect of non-renewable fuels on the environment and climate. The effects of those non-renewable fuels are so detrimental, that it has resulted in great changes in the climate and our environment.
Biofuel is a form of fuel that has its energy derived from the process of biological carbon fixation. This group of biological fuels are derived from different sources which include: biomass conversion and biogases. This type of renewable fuel is gaining public attention recently and this could be attributed to several factors that will be discussed later.
Bioethanol is a type of ethanol fuel made from alcoholic fermentation of different food products which include: corn, sugarcane and other starchy foods. Biodiesel itself is from vegetable oils and animal fats. There have been several issues as regards to the effects of biofuels on the global economy. This especially is in regards mostly towards the impact on food prices increase globally. Although there are other major raised issues against biofuels such as environmental and economic effects of the source of energy, economists are less concerned about those issues compared to impacts on foodstuffs price increase.
The arguments against the use of biofuel production because of the effects on food production globally (especially arable crops) cannot be said to be substantial. This is because; there is no appreciable link between the two variables simply because different factors actually influenced both variables. Although one variable which is biofuel production is mostly dependent on the food availability, there has not been any conclusive evidence regarding sole dependency on each other. However, the relationship which exists between both makes food production an important determinant of the availability of biofuel.
Some grains prices were said to double in price within a year and the increase was linked to increased biofuel production but that was not conclusive because it was discovered that after a period of time, there was a drop in food prices despite on-going increased biofuel production (Mueller, Anderson & Wallington). The implication of this is that other factors actually control the food prices. Some of those other factors are the weak US dollar and increased volatility of the commodity index fund investments. Cost of fertilizers and higher energy cost can also contribute to the increased food cost hence making the cause of increase in price a multifactorial based.
As we all know, economic effects of competition and increased demands usually favour lower prices. The reason for this is easily justified because the need for biofuel will ever be increasing and as the demand for the crops needed increases, more subsistent farmers will contribute making access to more crops easier and price cheaper. It has even been found that production of biofuel from sugarcane or starchy foods are commercially and economically cheap to produce when compared to production from cellulose which is another source of production (Deepak Rajagopal & David Zilberman). The essence or the implication of this is that when it is easier and cheap to produce, causing an increase cost of those crops are not feasible.
A critical look into the impact of biofuel will reveal an increase in demand for more land, water or other inputs which indicate that there are likely to be some form of effects of increase biofuels on all the highlighted areas. For instance, there might be a displacement of forest land or pastureland in a bid to provide areas of land for crop production (Deepak Rajagopal & David Zilberman).
Another dimension or views towards the role of increased biofuel use on price of crop production is that which explore the areas of advancement in technology. It is very important to favour arguments that are in view of technological advancements as a result of biofuels increase and advancement. The implications of this technological advancement is that it will affects the agricultural sector positively by helping to improve the present crops types, develop new or variation of present crops and enhanced productivity. The implication of this is that it would lead to more types and increased in volume of crops that would be produced hence affecting the reducing the stock price of those crops.
It is also very important to note that there are several factors that are good determinants of the price of food crops that are related to biofuels. For instance, the issue of international trade policy is a good determinant. In a situation whereby there is establishment of free trade policies or zones to favour the biofuel crops or in cases of removal of export or import duties related to biofuels. Such situations could actually be a major influence on the crops related to biofuels and then help determine the price.
The increase in price associated with food crops according to (Tyner) cannot be concluded to be solely dependent on biofuel increase. This is due to some of the factors highlighted above and also on government factors. However, saying that biofuel increase is the most important factor found to be associated with simultaneous increase in price of the crops in those regions of the world were the demand for biofuel is on the increase, is an important consideration. Tyner’s view of such relationships among those variables and their effects seem more to be complex. This is because of the use of some models to evaluate the relationship. From the conclusion, of Tyner’s arguments, it can be said to be in-line with the reality.
Several arguments have been made in favour of a direct relationship between increased demand for biofuel and subsequent increase in the price of food crops. The important consideration as regards to those arguments is that: government policies is a strong determinant of food crop prices globally, demand influence the price, environmental factors contribute greatly, and technological demands to produce such crops is also an important factor. Considering those highlighted factors and their relationship to crops that are used to make biofuels, it can easily be concluded that those crops prices are influenced together by those factors.
Work Cited
Christopher Strong, Charlie Erickson and Deepak Shukla. Evaluation of Biodiesel Fuel: Literature Review. 2010. Web. 3 December, 2011.
Deepak Rajagopal & David Zilberman. Review of Enviromental, Economic and Policy Aspects of Biofuels. Development Research Group. 2007. Web. 2 December, 2011.
Lester Brown. Starving for fuel: How ethanol Production contributes to Global hunger. Global Briefing. 2006. Web. 2 December, 2011.
Sherry Mueller, James Anderson, & Timothy Wallington. Impact of biofuel production and other supply and demand factors on food price increases in 2008. Review. 2011. Web. 3 December, 2011.
Taheripour, F., & Tyner, W. Biofuels, policy options, and their implications: Analyses using partial and general equilibrium approaches. 2010. Web. 2 December, 2011.
Thomas, W., Wallace, T., & Birur. D. Biofuels for all? Understanding the global impacts of multinational mandates. GTAP. 2008. Web. 3 December, 2011.
Tyner, Wallace. What drives changes in commodity prices? Is it biofuels? Biofuels. 2010. Web. 2 December, 2011.
