As the price of oil climbs to $117 a barrel and petrol at the pump reaches 110p a litre, motorists are wondering how long this latest spike is going to last. Is it just another of those temporary jumps in the cost of fuel that we saw in the 1970s and 1980s or is this a new reality which will last for good?

The answer is that it is likely to stay. While market prices may or may not continue shooting into the stratosphere over the next few months, they are certainly incapable of falling back down to the levels of $60-$70 a barrel seen even a year ago.

The reason is that oil supply is increasingly constrained by extraction costs while demand, fanned by the growth of huge emerging economies like China and India, is remorseless. The International Energy Agency forecasts that in 2008, the world will need an extra 1.3 million barrels a day (bpd), but only 800,000 extra bpd will be supplied.

Many parts of America, long considered the breadbasket of the world, are now confronting a once unthinkable phenomenon: food rationing. Major retailers in New York, in areas of New England, and on the West Coast are limiting purchases of flour, rice, and cooking oil as demand outstrips supply. There are also anecdotal reports that some consumers are hoarding grain stocks.

At a Costco Warehouse in Mountain View, Calif., yesterday, shoppers grew frustrated and occasionally uttered expletives as they searched in vain for the large sacks of rice they usually buy.

“The consumer spending slump and tightening credit markets are triggering a wave of bankruptcies in American retailing,” with ensuing store closures “expected to remake suburban malls and downtown shopping districts across the country,” writes Michael Barbaro for the Times.

Barbaro notes that over half a dozen store chains have filed for bankruptcy in recent months amidst “mounting debt and plummeting sales” and warns that financial troubles are “quickly spreading to bigger national companies.”

NYT Story

Basic access to food is slipping out of reach for many people in developing countries.

The cost of the rice has risen by more than three-quarters in two months and the price of wheat has more than doubled in the same time.

The desperation in dozens of countries has turned deadly of late. In the past week alone there have been violent, food-related riots in Haiti, Indonesia, the Philippines and Cameroon.

For all the economists and consumers who hope high food prices are temporary, here’s one reason why they probably won’t be: Farm costs are skyrocketing, making permanently higher prices essential for farmers to keep expanding production.

Inflation is biting farmers world-wide. In New Zealand, farm wages are up as much as 20% this year, and the average price of a dairy cow has jumped to more than $1,900 – almost double last year’s average of about $1,000. In Thailand and Indonesia, farmers are complaining about sharp increases in the price of fertilizer and diesel fuel.