April 18 (Bloomberg) -- The U.S. and Europe may have to reconsider their promotion of biofuels in the wake of surging food prices around the world, International Monetary Fund Chief Economist Simon Johnson said.

``I think rethinking is the right word,'' Johnson said in an interview on Bloomberg Television's ``Political Capital with Al Hunt,'' to be aired today. ``It used to be the case that biofuels, corn-based ethanol in the United States and also the development of bio-diesel in Europe, seemed like kind of a side issue. It's now front and center in global geopolitics.''

Johnson also warned of a ``new form of protectionism'' as major food-producing nations, including Vietnam, India and Egypt, have restricted exports in an effort to limit increases in domestic prices.

``There is a real danger of a downward spiral here, where the more people feel restrictions, the more you want to hoard your stuff,'' Johnson said. ``We're in a nasty situation right now.''

World food prices have surged by about 83 percent in the past three years, provoking riots in poor nations and threatening to set back efforts to reduce global poverty, according to the World Bank and IMF.

Rice Prices

The price of rice, the staple food for half the world, has doubled in the past year to an all-time high. Countries including Indonesia and Egypt have seen social unrest over high prices, and are attempting to restrain inflation and curb instability by limiting food exports or removing import duties on basic food staples.

``The implications are huge,'' Johnson said. ``In almost every corner of the world, poor people primarily eat rice these days, so the rice prices are clearly hurting people.''

The U.S. and other nations are encouraging the use of fuels made from crops such as corn and soybeans to reduce dependence on petroleum and limit environmental damage. Demand for biofuels, along with increased competition for cropland between food and fuel uses, is taking up much of the increase in the global crop production, according to a World Bank report. Food production is failing to keep up with demand, the bank said on April 9.

IMF and World Bank policy makers meeting in Washington last week sought to raise the $500 million that the United Nations World Food Program says is necessary for easing food shortages and stabilizing markets. The IMF said consumer-price inflation in poor or so-called developing countries will accelerate this year to 7.4 percent, compared with a January forecast of 6.4 percent.

U.K. Prime Minister Gordon Brown last week sent a letter to Group of Eight leaders saying countries should study the impact of using biofuels.

To contact the reporters on this story: Christopher Swann in Washington at cswann1@bloomberg.net

Last Updated: April 18, 2008 12:05 EDT