Panic Buying Causing Artificial Shortage

Posted: 15 January, 2011 in Babbles & Rants

The shelves at the supermarket seems to be void of cooking oil, most of the days … Why …?

Well, the common statement I hear is that the retailers and retailers are hoarding the stocks expecting the price of cooking oil to rose in the near future. That could be true but I think the main reason is the consumers gullibility.

Chinese New Year celebrations is just around the corner and like other festive seasons, families will do a lot off cooking. Restaurants expecting a huge turn out for family dinners will stocks on some cooking oil. Naturally, there’s going to be increase in demand during these seasons.

Then, when consumers see that supermarkets have less cooking oil on their shelves, people will start to talk … “there’s not much cooking oil at the supermarket, looks like a shortage in the commodity.” That’s a normal response to human being insecurity. The outcome, people will start buying extra too keep as stocks to make sure they have cooking oil of there’s should really be shortage. Instead of one bottle the family really needs, people will start buying three or four bottles.

Production and distribution of cooking oil is regulated by the Malaysian government as it is a controlled item, meaning the price is also controlled by the government. So, the unexpected increase in demand will create a shortage … An artificial shortage.

Retailers and cooking oil producers will play on this phenomenon to reap in extra profit. Firstly, retailers, will spread on the rumours that there’s supply shortage cooking oil, consciously understanding this will cause sales of cooking oil will increase when people starts to buy extra to keep stocks. The retailers have a faster turnover which is what businesses aim for.

Secondly, producers, will definitely will want to produce as much as possible, lobbying the government to allow the increase in supply. This of course will cost the government because the greater the supply of this subsidised commodity will cost the government more in cooking oil subsidies. This could lead the policy makers to increase the retail price of this controlled item. An outcome the businesses are looking forward to.

The consumers are at the losing end. Our own gullibility will make cooking oil cost more. Factory owners and supermarkets will reap in the moolah.

Photo: I doubt one family needs this much oil to cook, even for a month.

  1. kc says:

    stumbled here while researching where to buy materials to make cheese – good blog!