World Bank sees biofuels losing out due to cheaper oil

In Washington, the World Bank’s most recent Commodities Markets Outlook says Lower energy prices have also eased pressures to produce biofuels as an alternative energy source. Biofuels production has been an important driver of demand growth for food commodities in the past decade. The OECD agrees that lower demand for biofuel will mean a drop in demand for agricultural commodities as a whole due to stagnant policies.

“Energy exporting emerging and developing economies have struggled to adjust to persistently low prices,” said Ayhan Kose, Director of the World Bank’s Development Prospects Group. “Partly because of the strong linkages between energy prices and agricultural commodities prices, agricultural producers can expect lower prices in an era of depressed energy prices. Both energy and agricultural commodity exporting countries need to step up economic diversification efforts to bolster resilience to commodity price fluctuations.”

The World Bank is raising its 2016 forecast for crude oil prices to $43 per barrel from $41 per barrel due to supply outages and robust demand in the second quarter.