From Volume 7, Issue 28 of EIR Online, Published July 8, 2008

Global Economic News

World Bank Report: Biofuels Cause 75% of Food Inflation

July 4 (EIRNS)—A secret World Bank report reveals that biofuels are responsible for driving up global food prices by 75%, according to a report in the July 4 London Guardian, which obtained a copy of the report. It also refutes the idea that the cause for runaway food prices has anything to do with Indians and Chinese eating too much—the popular explanation. The report was not made public, so as not to embarrass the Bush Administration (not to mention almost all Western governments), which claims that biofuels are responsible for less than 3% of food-price rises, said the Guardian. Completed in April, just before the food crisis became front-page news, the Guardian's report comes out on the eve of the G-8 summit next week in Hokkaido, Japan, where the leaders of the world's leading industrial nations will most likely make the same lying statements that have been made on biofuels and speculation, as not being responsible for runaway prices.

The report's findings, according to the Guardian, parallel those of the soon-to-be-released Gallagher Report, by the British government, which states that biofuels have played a "significant" part in pushing up food prices. This report should have been released already, suggesting that it, too, is being suppressed.

On the lie that runaway food prices are caused by an improved diet in India and China, the report says: "Rapid income growth in developing countries has not led to large increases in global grain consumption and was not a major factor responsible for the large price increases." It states that even the droughts in Australia have had marginal impact, but rather it is the drive for biofuels by the EU and United States which has had the biggest impact on food supply and prices.

Since April, all gasoline and diesel in Britain has had to include a 2.5% complement from biofuels. The EU has been considering raising that target to 10% by 2020. "Without the increase in biofuels, global wheat and maize stocks would not have declined appreciably and price increases due to other factors would have been moderate," says the report. The prices on a basket of food examined in the study rose by 140% between 2002 and 2008. Estimating that fertilizer prices accounted for an increase of only 15%, it states that biofuels have been responsible for a 75% jump in prices over that period.

The Guardian writes that the report "argues that production of biofuels has distorted food markets in three main ways. First, it has diverted grain away from food for fuel, with over a third of U.S. corn now used to produce ethanol and about half of vegetable oils in the EU going towards the production of bio-diesel. Second, farmers have been encouraged to set land aside for biofuel production. Third, it has sparked financial speculation in grains, driving prices up higher."

Unlike other studies, its author, senior World Bank economist Don Mitchell, undertook a detailed month-by-month analysis of the increase in food prices, which revealed the striking impact of biofuels on the price of food and on the food supply.

The Guardian quotes former chief scientist of the British government Dr. David King as saying, "It is clear that some biofuels have huge impacts on food prices. All we are doing by supporting these is subsidizing higher food prices, while doing nothing to tackle climate change."

Top French Shipping Executive Calls Oil Price Hike a Fraud

July 5 (EIRNS)—One of the world's leading shipping executives called the oil price hike a hoax by speculators. Jacques Saade, the head of the French shipping company CMA & CMG, the third-largest in the world, recently told the French daily Le Figaro that the world shipping industry is facing a serious downturn because of the faltering world economy: "It is a latent crisis that will take time to disappear. I don't see it getting better before the end of 2009," Saade warned. Then he pointed to the high oil prices, which now account for 60% of the cost of shipping saying, "This [oil price] boom is artificial. Only speculation can explain the run up in price. One way or another, governments must put a stop to this."

Saade's statement can be taken as extremely authoritative. While CMA & CMG is mainly a container line, the shipping industry is intimately involved in the oil spot market, with shipping prices, which are also a target of speculation, going up and down based on the level of demand for oil. Owners of tanker fleets work hand-in-hand with oil speculators such as Marc Rich.

Vietnam To Reduce 2008 Coal Exports by 38%

June 5 (EIRNS)—Vietnam will cut overall exports of coal by as much as 38%, to 20 million metric tons this year, to ensure domestic supplies. The nation will reduce its 2008 shipments from more than 32 million tons last year, Nguyen Thanh Bien, Vice Minister of Industry and Trade, said at a government meeting in Hanoi this week.

Vietnam is the largest supplier of imported coal to China, and the cut will force southern Chinese power producers to transport fuel from northern mines, or import it from further afield.

The fuel is needed for the consumption of the domestic energy industry, Bien said.

Coal exports in the first half of the year fell to almost 14 million tons from 16.3 million tons a year earlier, according to Bien. The government last month raised the export duty on coal to 20% from 15% to reduce shipments.

Coal generates most of the electric energy in China, while coal export is a major source of Vietnam's foreign exchange.

Japan Rejects TCI's Bid

June 30 (EIRNS)—During a shareholder meeting on June 26, J Power, one of Japan's major power companies, solidly defeated an attempt by a British hedge fund, The Children Investment Fund, at looting J Power. TCI sought to have J Power increase dividends, appoint outsiders to its board of directors, place a limit on cross-sharing, stock-buying, and implementing a 70 billion yen stock buy-back program.

All rights reserved © 2008 EIRNS