Table of Contents
Oil prices and food consumptionThe law of demand states that the lower the price of something the more of it people will buy. The law assumes that there are no offsetting changes such as lower incomes, lower prices for other goods and so on. This means that the price of a good is inversely related to qualities purchased. The higher the price the less the commodity is purchased.
The law of supply states that the higher the price the more the quantities that is supplied in the market. So many sectors use oil as a main source of energy, such sectors include the aviation sector, manufacturing sector, ships, automotive sector, industrial sector, the generation of power and electricity, trains and automobiles. When there is no oil this sectors cannot function and if it does not function there will be no production in the world. The rising prices of oil will be felt in all sectors. Oil is used as a means of transport in the aviation, shipping and road transport. Though transportation of raw materials is taken for production of final products with oil, production can not be achieved.
Other factorsIn the industries oil is also used to run machines. In the manufacturing industry, industrial set ups, power generation oil is used to run all this machines. Therefore the rise in the prices of oil affects all necessities that are used in life. The prices of fare, transport, food and services will rise. This is because of the inflationary effect that comes up with delays in prices.
We have inherent inflation associated with the change in prices of oil. As inflation goes up consumption will come down investment will be lower as well as savings. Change in oil prices upward has various repercussions to the development of the world. In the recent past there has been a fluctuation in the world economy because of the crisis in the middle east. The organizational of oil producing countries cartel has made it there duty to control oil prices in the world. In the world today food prices is going up and there is a global shortage on food a close the world. The shortage has led to increase in food prices. The price of food that has increased for the last two years has led to the demand of this genetically modified food and other countries such as China have also adapted by technology in producing food. The supply and demand for food products and the changes in prices is now making the world think differently. What the world is experiencing today can be described as using the law of demand and there are very many factors that affect changes in demand of any product of service. But in the case of the world today, allover the world there is an increase of prices of goods and services. In Europe people are willing to use genetically modified product because none genetically modified is in shortage and the prices are going up as compared to before. The increase in prices was due to changes in climatic and whether which has led to the increase of prices for the little food that was available as demand remained the same. The change can also be attributed to change to some factors of production such as; increase in oil prices, and interest rates which were as a result of the subprime crisis. The subprime crisis has led to increase in the cost of capital which is an ingredient in the production of food.