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The oil war: what is the reason for the shocking increase in its price in Latin America and the world - Fintech Morning

The oil war: what is the reason for the shocking increase in its price in Latin America and the world

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Fried eggs? Maybe not… And why don’t we make some fish or chips?

The answer to that question is becoming increasingly difficult as the prices of vegetable oils – and especially sunflower oil – have climbed so high that they have become a luxury in the kitchen.

So high that some consumers complain and also laugh on social networks with messages like “I’m selling a shirt with oil stains.”

In Chile, for example, a bottle of pisco (the most common alcoholic beverage in the country) is cheaper than one of oil in some supermarkets.

And in Mexico it is the product whose price has increased the most within the food basket measured by the National Institute of Statistics (INEGI).

In the United Kingdom, Spain, Italy or Germany, rationing policies have been applied , with some supermarkets setting a purchase limit of between one and three liters per person per day.

United Kingdom

Along with rationing, it is increasingly common to find empty shelves.

The problem is not only that the price has gone up, but that in some businesses there simply isn’t.

The “liquid gold”

The escalation in fuel and food prices occurs in the context of rampant inflation that affects the entire world, driven mainly by the war in Ukraine and the economic effects of the covid-19 pandemic.

The value of food in the world has skyrocketed so much that international organizations have warned of an increase in hunger in the poorest countries.

person cooking

In addition to other food products such as wheat, corn, or soybeans – which have reached unthinkable prices – oil is one of the most affected.

Globally, the value of vegetable oils has increased 46.5% in the last 12 months , according to the Food Price Index of the Food and Agriculture Organization of the United Nations (FAO). ).

In Latin America, oil inflation in the last year covers a very wide range that goes from 9% in Bolivia to more than 60% in countries like Costa Rica.

The price of what is now called “liquid gold” that is sold in Chilean supermarkets as “vegetable oil” increased 67% between January and April of this year, according to the Office of Agricultural Studies and Policies (ODEPA), while sunflower oil (also known as marigold oil) was up 63.6%.

In this video published on Twitter, customers appear almost desperate to get oil in a supermarket.

In countries such as Colombia and Mexico, the increase is around 40%, while in others such as Guatemala, Panama or Ecuador, the increase has been —on average— greater than 20%.

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Ecuadorians have also taken to social networks to express their discomfort over the one-liter bottle at US$6 in some stores.

These are estimated values ​​that try to reflect an average of the increases in different parts of a country, but, without a doubt, the rise will depend on the neighborhood, the city, the supermarket and the brand of oil.

A look at the price in dollars of a liter of vegetable oil according to the data sent by some BBC Mundo correspondents can help to get an idea of ​​the cost of the product in relation to the minimum wage in some countries.

price of cooking oil  Selected countries of Latin America (values ​​in dollars).  .

Sunflower oil and war

Among all the vegetable oils available on the market, the one that is most scarce and, therefore, has risen the most in price, is sunflower oil.

Known as “the granary of Europe”, Ukraine and Russia accounted for 71% of sunflower oil exports last year, according to ISTA Mielke GmbH, a company specializing in global oil market analysis, based in Hamburg, Germany.

With the war, supply has dropped to minimum levels, a problem that adds to the declining production of recent years that already had the market in trouble.

Major exporting countries of sunflower oil.  Thousands of tons in 2021. Argentina and Turkey are official values.  The other values ​​are estimates.

“A Big Concern”

Alejandro Betancourt, an oil expert at ISTA Mielke GmbH, says that the global production of vegetable oils has shrunk in recent years.

The prices of the four main oils – sunflower, palm, rapeseed (canola) and soybeans – “have tripled since 2019”.

Germany

This situation has worsened in the last two months, he tells BBC Mundo, due to the war in Ukraine and a sharp decline in palm oil exports, both due to lower production and export restrictions imposed in Indonesia.

“There is great concern about the inflation of food prices and the worsening of the food supply,” he says.

“The Triple Crisis”

And the future does not look very encouraging for now, explains Gustavo Idigoras, president of the Argentine Chamber of the Oil Industry and Cereal Exporters Center.

The oil market “has no prospect of stabilizing. We have to prepare for at least two years of high prices” from the moment the war ends, he tells BBC Mundo.

Germany

The situation is complex because several causes have come together for the current increase in prices, beyond the droughts that have been affecting global production.

On the one hand, the end of the pandemic increased oil consumption and the war in Ukraine reduced supply.

But there is another element at play, he explains, that is fundamental: a high demand for vegetable oils to be used in the biofuel industry.

“It is a triple crisis due to the pandemic, biofuels and war ,” says Idigoras.

person cooking
Link: https://www.bbc.com/mundo/noticias-61387963
Author:

  • Cecilia Barria
  • BBC News World
Author avatar
Edinson Love
https://fintechmorning.com

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