Ramadan, Fasting, and the Price of Oil

Remembering 9/11, praying for peace, but the bad guys might be praying for victory, and during the month of Ramadan no less.

I could not resist this lead sentence on "Fasting not fighting as Muslims mark Ramadan" by Charles Onians.

"CAIRO (AFP) - Muslims around the world this week begin the fasting and feasting month of Ramadan amid hopes of violence easing in some of the Islamic world's conflict hotspots but hit hard by rising food prices."

Never mind the problems with the construction of the lead sentence, or the paradox of "fasting and feasting month," I was interested in the mention of how high food prices were affecting Ramadan.

After reading how some Muslims were aiming for a peaceful month,

"Pakistan marked Ramadan by halting a major military campaign against Taliban rebels on its border with Afghanistan,"

while others were clearly taking aim at their enemies,

"But in Somalia Islamist militia commander Yusuf Mohamed Siad told reporters that his fighters will intensify attacks against government and Ethiopian forces.
'We will double our attacks against the Ethiopians and their Somali government stooges even during the month of Ramadan until we root out the enemy of Allah from the country,' he said."

we learn about the economics of Ramadan,

"But soaring food prices have left many Lebanese worried about making ends meet, with charities working to provide low-income families with food to survive the month.

Gulf governments enjoying windfalls from high crude prices and high-profile companies are keen to be seen to be sharing some of their wealth with the less fortunate, splashing out on free iftars for the poor.
With inflation running in double digits in many Muslim nations, governments have been trying to ensure an adequate supply of staples in order to prevent retailers from taking advantage of Ramadan to raise prices."

Am I hearing echoes of things being said elsewhere about greedy oil companies, and the government being responsible for the food supply and the prices?

Feeling somehow responsible for the plight of the feasting fasters, I dug a little deeper looking for the source of my angst.

What have we been told to be the cause of high food prices? This from the IMF,

"• Strong food demand from emerging economies, reflecting stronger per capita income growth, accounts for much of the increase in consumption. Although demand growth has been high for some time now, the recent sustained period of high global growth contributed to depleting global inventories, particularly of grains.

• Rising biofuel production adds to the demand for corn and rapeseeds oil, in particular, spilling over to other foods through demand and crop substitution effects. Almost half the increase in consumption of major food crops in 2007 was related to biofuels, mostly because of corn-based ethanol production in the US; and the new biofuel mandates in the US and the EU that favor domestic production will continue to put pressure on prices.

• At the same time, supply adjustment to higher prices has remained slow, notably for oil, and inventory levels in many markets have declined to the lowest levels in years.

• The policy responses in some countries are exacerbating the problem: (i) Some major exporting countries have introduced export taxes, export bans, or other restrictions on exports of agricultural products. (ii) Some importing countries are not allowing full pass-through of international prices into domestic prices (less than half a sample of 43 developing and emerging market countries allowed for full pass through in 2007).

• Drought conditions in major wheat-producing countries (e.g., Australia and Ukraine), higher input costs (animal feed, energy, and fertilizer), and restrictive trade policies in major net exporters of key food staples such as rice have also contributed.

• Financial factors: the depreciating US$ increases purchasing power of commodity users outside of the dollar area; falling policy interest rates in some major currencies reduce inventory holding costs and induce shifts from money market instruments to higher-yielding assets such as commodity-indexed funds."

I just knew the U.S. was to blame, but shouldn't food prices fall during Ramadan if everyone fasts? I would have guessed that per capita caloric consumption and prices would fall.
Those iftars must be quite a feast.