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The surprising fall in oil prices since mid-2014. What does it mean for food and agriculture?

Research report

Written by Steve Wiggins, Sharada Keats

Research report

The key messages in this update are:

·     Oil prices have fallen since mid-2014 from more US$100 to US$50–60 a barrel

·     Lower oil prices reduce costs of machinery operation, fertiliser and transport in farming. Cereals prices are expected to fall by 10–14% on international markets, reinforcing the new norm of lower and more stable cereals prices.

·     Lower oil prices make biofuels from low-yield feedstock, such as jatropha, uneconomic. Sugar cane ethanol and biodiesel from oil palm remain profitable. US ethanol production will be unaffected, owing to mandated production.

·     All this is good news for both farmers and consumers. A danger exists, however, of political complacency if governments cut spending on research and other public goods that underpin rising agricultural productivity.

Steve Wiggins and Sharada Keats