The global economy is incredibly complicated. Events from one end of the world can affect commodity prices on the other end, political uncertainty can cause stock prices to go down, and a rise in gas prices can cause food prices to rise along with it.
Despite its complexity, breaking down economic events one level at a time can clear things up a bit. So where do we begin dissecting how oil affects our food prices?
The most obvious way is via transportation costs. Rising gas prices are just an added expense on top of manufacturing. That’s an easy one.
A less easy one is how the demand for biofuels rises when gas prices become less and less affordable. What are biofuels? Biofuels are non-fossil liquid fuels made from corn (why aren’t we funding this?). As demand for these biofuels increases, crop prices skyrocket.
Another problem is how smaller countries import food while focusing on production of cash crops. Without staple crops like corn, they’re forced to rely on the rising price of imports from other countries.
So, in an indirect way, smaller countries are sometimes severely impacted by global oil prices.
On top of that, farmers of those crops depend on oil to power their machinery. They’re already at a disadvantage because of the resources, but a rise in oil prices could be devastating and force them out of business–not to mention cause the price of their crops to soar.
High food and fuel prices affect those in poor countries more than Americans, typically, and that’s just the beginning. Rising oil prices, or the sudden unavailability of food as a whole, would lead to a complete breakdown of the food system.