Topic: COMMODITY MANIPULATION: DEMAND/SUPPLY (Read 196 times)

That's just not gonna happen! To control the production of a commodity, we have various ministries who strictly controls almost every aspect of the production. Also increasing production to bring down price, will only have a temporary effect for majority of the commodities and may have cascding negative effect on that sector which will eventually lead to huge losses to the manufacturing companies. It's unrealistic thinking!

It isn't a simple thing to let what you want to happen. Letting the supply dwindle down by producing resources nonchalantly could result in the resources of the world to dwindle at a fast pace.

 There is a thing called productive efficiency where the economy cannot produce one more of a good without taking the resourcws of another. Basically, it means to produce something at the cost of another not being produced. This could help when we determine the supply that the world is essentially in need. If we nonchalantly produce everything, efficiency could be reduced and those products that people normally use cpuld potentially stop being produced since the resources allocated to it were used for others.

This is not a sustainable action! You could implement this kind of strategy but it will only last for a short period of time and its doesn't make sense! Like for example, most countries in Middle East heavily rely on crude oil as their main source of income and lifeline and if ever there is a sharp decline on the price of this product, most of this nations will be heavily affected and that is one of the vulnerabilities of having an economy which rely heavily on one industry.

As a side note, If my memory serves me right, the reason why Iraq invade Kuwait is that the latter was selling oil at a very cheap price than Iraq's thereby affecting Iraq's oil production and income! This hasn't happened at all had Kuwait's leader had agreed to Saddam's request to increase their crude price so that Iraq's crude price will be competitive in the market as well.

I think you contradict yourself here, how can you balance human needs when you wanted to crash the price for example, crude oil? Economics of a nation doesn't work that way, that's why we can't just put people in the office who don't understand the real score behind, and if a certain nation has officials who don't have the knowledge, then it will spell doom just like what you mentioned, Nigeria. It is still based on supply and demand, if you have a abundant of crude oil and you put in at a exorbitant price, no one will even buy it and countries are going to look for other options that is cheap and has reliable supply. IMHO.

What incentive would anyone have to increase production, when they know that demand is inelastic?

All of these competitors that are producing the same good/service are essentially colluding in a legal way to artificially surpress supply, and that is for a reason. They are not just going to give this up for the greater good of the world, unfortunately.

You simply can't increase production unless someone with vested interest in keeping prices high decides to do so, and that's obviously never going to happen.

It's over half a decade since Nigeria discovered crude oil, and at this point there is still no functioning refinery capable of sustaining the needs of the nation, or to export to other nations. Corruption and mismanagement is one of the top issues in Nigeria.
Saudi Arabia for example can account for every drop of oil which is drilled from it's land and they have a blossoming economy.


Depending on the product, increasing production would usually lead to a hike in price as more factors of production have to be employed to meet up with the demand.

Actually market works on the concept of market equilibrium which means markets generally automatically correct themselves and set a price based on the aggregate demand and supply prevailing in the market. However this correction of market takes a bit of time after the supply or demand has just exploded during this meantime it is likely that a hell lot of people could suffer due to depression or hyperinflation therefore Government tries to slowdown things by controlling supply as well as demand. If we crash the prices by increasing production most of the oil companies will lower down prices of OIL but oil being a very crucial asset it will directly bring down prices of almost everything in the economy therefore making a deflationary situation in the economy which could hamper the economic growth which is why government keeps on balancing such things. But harsh reality is this balancing is done by countries merely for good of their own citizens. I mean USA would never think of Nigeria or it's people while making such policies.

we can't just crash the prices. it's determined by supply and demand. the world economy runs on oil---you can't just erase that demand. and as you point out, OPEC nations can simply limit supply to keep it within a price range that benefits their national economies.

if OPEC countries limit the supply too much, they risk oil becoming expensive enough that other sources (like canadian tar sands) become viable to produce at scale. that's the "check and balance" the world economy has on arabian oil sources.

This is a very fragile topic. Politics, corruption, greed and economic interests are all involved. In an ideal world the production of regenerable resources should be maximized so the whole world can benefit. We're almost in 2020 and there are still millions or billions of people who suffer from hunger! That's a huge problem that can be easily solved if there is the will and competency. Instead our so called "leaders" promote other "values" that rotten our economies and destroy lives. Earth has more than enough resources to satisfy our current population, but the management is precarious.

Well, the USA part is correct, there has been a lot of laws in the past that literally gave farmers money just not to farm corn for example, you would make money depending on the size of your farm for just not farming corn, you could leave the farm as it is and farm whatever you want other than corn and you would still make money.

There have been regulations like that all around the world for centuries, back in the day in roman empire there was a craze for honey wine, it is nothing major, any wine you have that was mixed with honey could have been sold because there was literally no health inspections but after some time it got super cheap with super horrible products so there was a regulation where empire itself bought the wines from known places that made good products and sold it back to public so that the market would stabilize with only good products. It is just quite common and old as time.

Increase of production will also needing a big budget and as your question of decreasing the price, do you think that it's going to be effective? the market for each product is very competitive these days unless you're living in a country that's being handled by the oligarchs. Manipulation and hoarding usually happens in the market and I agree with cryptobry that a strong leader that has political will can solve this.

Manipulations can come in different ways, forms, types and degree...this is quite true in international commerce involving commodities especially that of oil which is very much needed by all countries so their daily economic activities will not come to a halt. Lucky are the countries which have adequate supply of the "black gold" because they can take advantage of the market when prices go up and would not have to worry where to source supplies and paying a good price for them. As to countries which are at the mercy of international oil suppliers, they are the ones paying the premium whenever OPEC decides to control the flow of oil.

Now, having said that, the reality is that in terms of production of almost anything, the flow of supply really belongs to those who are producing them and those who are providing the distribution infrastructure. In the case of oil, the buyers are at the mercy of suppliers unless there is an oversupply in which prices can go down drastically like what happened years ago. That is why producers need to control the production as well as distribution and they are doing it by reaching an agreement.

Can we do something about it? As for me, only a powerful government can tell this group pf producers not to do anything with the supply. Not even USA is capable of ordering them to do otherwise. Unless we can also unite the buyers not to buy for a certain period of time...but that is almost impossible as oil is very essential to the running of the global economy. Only a lessening of the demand can change this dynamic for good...and can we do that? Maybe we can by exploiting other sources of energy but that can be another story altogether.

Hello guys,

I understand when we have limited supply, and higher demand, the price will naturally be forced up. This is good for currency provided the currency is fulfilling its purpose.

Now, I have an issue with government controlling the volume of crude oil to be produced per day by OPEC nations in other to avoid price crash, well this will just make nations without crude oil to pay through their nose, and nations with bad management of the resources will suffer too like Nigeria, which export their crude oil and later buy the finished product, thereby paying what is known as subsidy on the refined product, in other to make it less expensive for her citizens, thereby pushing the nation into debt. I also read that in USA, some farmers are paid not to farm in other to keep the price stable and not crash them, whereas we still have people suffering in the world and in the USA.

My question is this: what if we just crash the prices by increasing production, and ensuring other manufacturing sectors are running to balance human needs in the world?  Although this is different from currency.