Economic Challenges in Commodity Prices, Oil and Resource Shortages

4 06 2011

Key Concerns/Issues:

  • Commodity prices are on the rise. Concerns over the european debt crisis, slow growth in the US and the possibility that China’s economy may overheat are causing uncertainties in the market, and as a result, people are choosing to invest in more conservative, safer commodities such as precious metals.
  • Shifts in climate and ineffective transportation/storage are causing major losses in potential crop consumption and production, especially in crop-dependant countries. In addition to this, the current industrial agriculture policies make up one third of global greenhouse gas emissions.
  • Unrenewable sources of energy such as oil and coal continue to rise in price and are still relied upon for a large portion of energy worldwide. The market’s reigns being in the control of speculators has resulted in a steep rise in prices in the past couple of years, reaching significant highs in the 2007/2008 oil crisis.

Resulting Challenges to Canadians:

  • Increasing prices in oil, food, and other commodities means that Canadians have less disposable income available. This affects our economy in an adverse way: consumer spending encourages money to circulate instead of staying immobile in investments, and in some cases the majority cannot go without commodities such as gas- it is integral to a high number of businesses and industries as well as for personal use.
  • Oil is not only expensive, but unrenewable. It was long theorized that rising prices would encourage consumers to look towards alternative energy sources such as solar, wind and electric, but seeing as there is still much money to be made in the messier corners of the market, the shift has been significantly slower than is healthy for the economy and the environment.

Supporting Statistics and Evidence:

  • When oil per barrel was around $140 or $150, Canadians were paying $1.37 per litre, when this year oil is around $95 people are paying about $1.35 per litre (Federal Industry Minister Tony Clement)
  • Consumer prices rose 3.3% in the 12 months to April. On a seasonally adjusted monthly basis, consumer prices rose 0.3% in April (Stats Canada).
  • Currently, 35-40 percent of harvests are lost due to inadequate transportation and storage facilities, while a further 35-40 percent goes to wealthy Organization for Economic Cooperation and Development (OECD) countries.
  • According to experts like De Schutter, the inability of 10 percent of the world’s population to feed itself is a reflection of unsustainable patterns of consumption and deeply flawed models of industrialized agricultural production which, if allowed to continue, will divert 50 percent of global cereal harvests towards feeding cattle by the year 2050.
  • Industry insiders have indicated that oil speculators drive up market prices significantly; problematically, popular economics dismissed this concept, and further influences the market’s characteristic panic attacks.

Possible Solutions:

  • Agro-ecology, which includes systems that produce their own  fertiliser using materials and waste from the surrounding  environment, is being increasingly viewed as the only viable solution  to the hunger crisis. Since prices of fertiliser doubled during the  2008 food crisis, continents like Africa that import 95 percent of  their chemical fertilisers could see radically different outcomes in  production by adopting agro-ecological techniques.
  • NATO and global gobernments should help Arabic countries to recover from wars and conflicts in order to stabilize the situation. It will help to lower the oil price by reassuring speculators that oil will continue to flow.
  • A monitor should be established in order to control speculators and invesitgate possible collusions on oil pricing. It is integral that this panel represent an impartial global view of the situation, and not provide another revolving door for oil company moguls to use as a means of hiking prices even further.
  • In order to encourage both environmental responsibility as well as fiscal economic improvement, the government should continue to offer or increase funding for reimbursements and incentives for purchasing green and/or renewable technology. Not only will this eventually eliminate oil prices from everyday Canadians’ list of economic woes, but it will also encourage new facets of business in technology and engineering.

Russian drought

6 03 2011

The last summer’s Russian drought  caused  5.5-percent decrease in global wheat production in the 2010/2011 market year. Consequently,the cost of wheat has increased.  As a result supply has decreased because natural resource increased in its cost. It also relates to a number of sellers, since there are fewer producers who decrease supply of wheat.