(Published in Manila Standard Today on Jun 3, 2008, under the Greenlight column)
Like the proverbial oil and water, oil and rice shouldn’t mix as it will spell disaster. Increasing prices of oil and rice in the world markets have hit the Philippines hard which caused the prices of goods to climb. Inflation is forecasted to rise to a record high of 5.5. to 6.5 percent in May and might reach 9 percent in June. In this era of oil price of 120 dollars-a-barrel and tight rice supply, overall food prices already rose 12 percent, and the price of rice alone rose to nearly 25 percent from a year ago. As a result, poverty in this country may reach record highs – truly a disaster.
Indeed, oil and rice (or food for that matter) are two commodities that have a powerful impact on economies, countries, and its people. Individually, they have become threats to national security of countries the world over.
Nations’ dependence on oil and its shortage will pose greater risk on national, global, and energy security. Oil will become a geopolitical weapon used between the oil-producing and oil-consuming nations which will result to the possible explosion of Middle-East conflict. It has been reported that oil, among other factors and considerations, played a role in the Bush administration's decision to invade Iraq. With 70% of the oil reserves of the Organization of the Petroleum Exporting Countries (OPEC) residing in the Middle-East, the depletion of oil in the future will pose greater risk of large-scale conflict.
On the other hand, the alarming price increases of staple foods (e.g. rice and wheat), have brought riots in about a dozen countries – from Philippines to Haiti - threatening national and food securities. Early this month, five big Asian rice exporters - Burma, Cambodia, Laos, Vietnam, and lead by Thailand - agreed in principle to form a cartel to be known as the Organization of Rice Exporting Countries (OREC) that would manage rice price-fixing, akin to OPEC. Many lawmakers around the region have already expressed concern on this planned cartel, as it could control the staple food and price it beyond the reach for millions of people. Thailand eventually dropped its plan amid opposition.
Unlike oil and its organized OPEC which has a global control of petroleum, a possible OREC in Asia has only a regional dominance. Rice exporters do not have the capacity to establish cartel in the same magnitude as OPEC, as there are over 80 countries producing rice.
The security risks associated with oil and rice, seemingly are separate impacts that nations need to prepare for. But in combination, they may pose the greatest threat and risk ever known, because one is inextricably linked to the other.
For one, many experts agree that the rising price of rice is not due to its shortage but to the uneven distribution. There is enough rice in the world to feed its entire people. The problem lies in the distribution of rice from other rice producers (apart from the ASEAN exporters) to the rest of the countries that need it; and distribution and logistics require fuel, i.e. oil, to transfer goods from one place to another. The higher the price of oil, the higher the distribution cost, the higher price of goods transported.
Another link between oil and rice is the increasing production of biofuels. As a result of the Kyoto Protocol to reduce the world’s dependence on oil, the World Bank said that almost all of the increase in global corn production from 2004 to 2007 went to ethanol production in the United States, depleting supplies for other uses. Critics including the World Bank, are blaming that the rise of biofuel production as contributing to the soaring price of food (rice and wheat) around the world.
Oil and rice are two separate commodities that should be tackled in combination. Nations should still be reducing its dependence on oil by developing alternative sources of energy apart from biofuels such as solar and wind energy. But they should also be developing new technologies for producing higher-yield, disease-resistant grains.
Energy and food security are two issues that need to be figured out as one. And we have the biggest stake on this as the Philippines is a net importer of oil, and was the world’s biggest importer of rice last year.
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Reynaldo C. Lugtu, Jr. teaches management and marketing courses in the MBA Program of De La Salle Professional Schools. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.
Like the proverbial oil and water, oil and rice shouldn’t mix as it will spell disaster. Increasing prices of oil and rice in the world markets have hit the Philippines hard which caused the prices of goods to climb. Inflation is forecasted to rise to a record high of 5.5. to 6.5 percent in May and might reach 9 percent in June. In this era of oil price of 120 dollars-a-barrel and tight rice supply, overall food prices already rose 12 percent, and the price of rice alone rose to nearly 25 percent from a year ago. As a result, poverty in this country may reach record highs – truly a disaster.
Indeed, oil and rice (or food for that matter) are two commodities that have a powerful impact on economies, countries, and its people. Individually, they have become threats to national security of countries the world over.
Nations’ dependence on oil and its shortage will pose greater risk on national, global, and energy security. Oil will become a geopolitical weapon used between the oil-producing and oil-consuming nations which will result to the possible explosion of Middle-East conflict. It has been reported that oil, among other factors and considerations, played a role in the Bush administration's decision to invade Iraq. With 70% of the oil reserves of the Organization of the Petroleum Exporting Countries (OPEC) residing in the Middle-East, the depletion of oil in the future will pose greater risk of large-scale conflict.
On the other hand, the alarming price increases of staple foods (e.g. rice and wheat), have brought riots in about a dozen countries – from Philippines to Haiti - threatening national and food securities. Early this month, five big Asian rice exporters - Burma, Cambodia, Laos, Vietnam, and lead by Thailand - agreed in principle to form a cartel to be known as the Organization of Rice Exporting Countries (OREC) that would manage rice price-fixing, akin to OPEC. Many lawmakers around the region have already expressed concern on this planned cartel, as it could control the staple food and price it beyond the reach for millions of people. Thailand eventually dropped its plan amid opposition.
Unlike oil and its organized OPEC which has a global control of petroleum, a possible OREC in Asia has only a regional dominance. Rice exporters do not have the capacity to establish cartel in the same magnitude as OPEC, as there are over 80 countries producing rice.
The security risks associated with oil and rice, seemingly are separate impacts that nations need to prepare for. But in combination, they may pose the greatest threat and risk ever known, because one is inextricably linked to the other.
For one, many experts agree that the rising price of rice is not due to its shortage but to the uneven distribution. There is enough rice in the world to feed its entire people. The problem lies in the distribution of rice from other rice producers (apart from the ASEAN exporters) to the rest of the countries that need it; and distribution and logistics require fuel, i.e. oil, to transfer goods from one place to another. The higher the price of oil, the higher the distribution cost, the higher price of goods transported.
Another link between oil and rice is the increasing production of biofuels. As a result of the Kyoto Protocol to reduce the world’s dependence on oil, the World Bank said that almost all of the increase in global corn production from 2004 to 2007 went to ethanol production in the United States, depleting supplies for other uses. Critics including the World Bank, are blaming that the rise of biofuel production as contributing to the soaring price of food (rice and wheat) around the world.
Oil and rice are two separate commodities that should be tackled in combination. Nations should still be reducing its dependence on oil by developing alternative sources of energy apart from biofuels such as solar and wind energy. But they should also be developing new technologies for producing higher-yield, disease-resistant grains.
Energy and food security are two issues that need to be figured out as one. And we have the biggest stake on this as the Philippines is a net importer of oil, and was the world’s biggest importer of rice last year.
-------------------------------
Reynaldo C. Lugtu, Jr. teaches management and marketing courses in the MBA Program of De La Salle Professional Schools. He may be e-mailed at rlugtu2002@yahoo.com or visit his blog at http://rlugtu.blogspot.com.
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