the visible hand

it is the theory which decides what can be observed – einstein

world’s hunger for fuels: oil and corn hit record highs

Posted by ecoshift on May 9, 2008

FT.com / In depth – Oil and corn hit record high
By Javier Blas in London
Published: May 9 2008 08:41 |

Crude oil and corn prices surged to record highs on Friday as the world’s hunger for fuels continued to convulse the energy and agriculture markets.

The rise in oil prices to a record of $126.2 a barrel – double the level of a year ago – was the culmination of a stunning week in which prices jumped by $10, stoking fears of higher inflation in spite of lower economic growth.

A year that began with people asking whether oil prices would finally reach $100 a barrel is seeing some traders already betting on when it will hit $200.

The increase in energy costs is putting fresh pressure on the Organisation of Petroleum Exporting Countries, the oil producers’ cartel, to increase levels of production.

On Thursday, Abdalla El-Badri, Opec’s secretary-general, said the market did not need more oil. “There is clearly no shortage of oil,” he said.

However, these comments contributed to the sharp rise in prices and on Friday, for the first time in months, some ministers in the group showed signs of nervousness, suggesting that they would be in favour of meeting ahead of the September conference to review the market.

The jump in oil prices is also driving up the use of agricultural crops such as corn and soyabean for biofuel, exacerbating food inflation and aggravating shortages across the world.

The US Department of Agriculture revealed on Friday that the US biofuel industry would consume one third of the country’s corn crop in the 2008-09 season – or 4bn bushels – up from about 22 per cent a year earlier – or 3bn bushels.

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