At a time when governments around the world confront popular anger over the surging cost of food and energy, all eyes are on this year's global harvest. With the world food supply stretched tight, governments are anxiously awaiting news of a bumper crop.

So far, their hopes have been frustrated. Heavy rains in the American midwest have delayed the planting of several crops. Across the world in Australia, drought has further depressed output. Global economic growth, particularly the Asian boom, continues driving demand for food and fuel. Surging oil prices, in turn, have prompted some governments to steer their farmers to replace food production with corn for ethanol production, further exacerbating the situation.

Compounding all this has been the response of the US central bank, the Federal Reserve Board, to that country's financial crisis. Sharp cuts in interest rates have pumped a sea of dollars into the planet's money supply. Some analysts think this has led to speculation in world commodity markets. Meanwhile, the fact that many currencies - including China's - are more or less pegged to the dollar, has resulted in a further rise in demand in Asia.

$250-per-barrel oil

So, coming to your neighbourhood this summer: the perfect storm. Rising demand, tight supply, and cheap money might result in food and energy shortages. Some energy analysts are predicting $250-per-barrel oil. One trembles at the thought of what faces poor countries in the coming months.

The good news is that, in the foreseeable future, the storm will probably pass. Energy consumption is relatively inelastic, which means that it does not respond quickly to price changes. Nonetheless, given the shock that now greets SUV owners when they fill up at the pump, there are signs that Americans, at least, are restraining their energy consumption.

Furthermore, in many countries, and especially in Asia, governments subsidise the price of fuel. But with the difference between local and world prices widening by the day, many governments have little choice but to pass price increases off to their people. Therefore, Asian energy consumption is likely to drop, further depressing prices.

Meanwhile, food production is much more responsive to price changes. Short-term effects like a drought can depress supply, but a jump in prices usually encourages farmers to come quickly back into production.

Starting to wake up

All the while, the world's central bankers are starting to wake up to the dangers of excess liquidity. From Beijing to Washington, they are starting to signal that money supply will be tightened, through more restrictive reserve requirements or higher interest rates. If the global money supply contracts, the boom will slow. In some places, economies may slide into recession.

It is probably no coincidence that whenever the world's stock markets rally these days, commodity prices follow. As distasteful as it may be for them to do, men like Ben Bernanke, the overseers of the world financial system, will probably need to induce further falls in stock and property markets to restore balance to the world economy.

There is, however, bad news as well. If in the medium term, we get relief, in the short term we probably will face a rough ride. Even analysts who predict a fall in the price of oil nonetheless expect that it will continue rising in the coming months.

As if - braced as we are for another hurricane season - we in Jamaica don't already have enough to worry about. The current government could use more imagination in addressing the crisis. But the previous one might explain why, when food and fuel were cheap in the '90s, it failed to take advantage of the savings to prepare us for the next rainy day.

John Rapley is president of Caribbean Policy Research Institute(CaPRI) an independent think tank affiliated to the UWI, Mona.