Economic concern relative to oil crisis and economic nonsense
First of all, what made me laugh was an Englishman who expressed his economic worry about rising oil prices consequences on the world economy. He put it in this way:’Petrol is still cheaper than beer, but we are always being told that beer is too cheap’.
Others made a same interesting point that prices continue to be too low since consumption of gazoline still hasn’t declined significantly. It doesn’t puzzle me why people think so. However, which one do you think is wrong? Actually, the answer depends on which level of income is considered.
Wealthy nations are by far less sensitive to price variations than the poor economies and it doesn’t affect their consumption that much.
Are there any reasons why companies should charge low prices? This seems highly unlikely and for a maximum profit sake, firms won’t cheapen oil price. Then, will the expected rise of Saudia oil output help bring oil prices to normal level?
Let’s now talk about the sharp food price rises. We have been told that both developed and developing countries will be suffering from continued food price rises. However, in poverty -stricken nations and in occupied territories, people on very low income will be hit badly and must face starvation. And yet, in most of these countries, agriculture is the mainstay of the economy-it contributes more than 50 per cent of GDP and provides livelihoods for large numbers of the population.
Moreover, increased demand, poor weather and drought (which results in shortfalls in food supply) and increase in the use of land to grow crops for transport fuels undoubtedly caused tremendous growth in food prices. So, many think social unrest will result from that.