A framework for analyzing the interplay among food, fuels, and biofuels

• The relationship among food, fuel, and biofuels is examined.
• One of the key causes of the post-2004 food price increases is the high cost of energy.
• Unless crude oil prices decline, food prices are likely to stay high.
• An innovation which increases the energy content of crops using arable land, may further increases in food prices.

This paper provides a framework for analyzing the complex relationship among food, fuels, and biofuels. It first notes that high energy prices increase the costs of producing food and can induce policies that divert food crops to the production of biofuels. Then, it argues that sustained high crude oil prices, in addition to rendering biofuels profitable, could also induce innovations by increasing the energy content of (existing or new) crops grown on arable land, in turn causing further food price increases. Hence, as we move forward, crude oil prices are likely to play an even more important role in shaping food price trends.