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.

During the past week, the surge in oil prices continued with crude, gasoline and diesel prices all hitting new highs.

The great irony in all this is that the problem is simple to understand. World crude oil production has been essentially flat for the last three years while 1.3 billion Chinese, 1.1 billion Indians, and another quarter billion or so living in oil exporting countries continue to increase their oil consumption at a prodigious pace. Incidentally, the Chinese just announced that their diesel imports during the first quarter of 2008 were up seven fold over 2007.

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.

Two years ago the UN’s Food and Agriculture Organisation expected biofuels to help eradicate hunger and poverty for up to two billion people. Yesterday the UN secretary general, Ban Ki-moon raised real doubt over that policy amid signs that the world was facing its worst food crisis in a generation.

Since the FAO’s report in April 2006 tens of thousands of farmers have switched from food to fuel production to reduce US dependence on foreign oil. Spurred by generous subsidies and an EU commitment to increase the use of biofuels to counter climate change, at least 8m hectares (20m acres) of maize, wheat, soya and other crops which once provided animal feed and food have been taken out of production in the US.

Robert Zoellick, president of the World Bank, said this week that prices of all staple food had risen 80% in three years, and that 33 countries faced unrest because of the price rises.