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Wednesday, February 28, 2024

Increase in oil and sugar prices. Mark Zuber’s commentary

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Sugar has increased dramatically and this is a very unusual situation – noted in an interview with TVN24 Biznes Marek Zuber, an economist. He pointed out that the next product on the podium is rapeseed oil, which has become three times more expensive. “However, the fall in consumption and demand is too small to force down prices,” he noted. He added that since May 2022, real wages have been falling. “We have a very long period of wage decline, we have never experienced anything like this in 30 years of a market economy,” he said.

In an interview with TVN24 Biznes, Marek Zuber, an economist, pointed out that “in February 2022 sugar price increased by 85% year-on-year inflation of 18.4 percent.

– Sugar has gone up dramatically and this is a very unusual situation. If we look at the price on the European or global market, we don’t have anything like that. In the first part of last year, even price drops were recorded. When we look at European or global markets, we must take this into account dollar’s exchange rate or the euro. Certainly, this would not motivate a doubling of sugar prices, he assessed.

Why has sugar become so expensive?

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The economist explained that several factors caused this situation. – We have one large retailer in Poland, which has over three thousand stores. It is struggling, like all networks, with a lack of hands to work – he said.

– Sometimes the cash register is empty, sometimes some goods are not on the shelf for this reason. There are also not enough people in the logistics centers. Therefore, once in a while such a retailer will not deliver some goods to the store, he noted.

As an example, he gave last year’s queues at petrol stations in Great Britain – These queues were not because there was a shortage of oil and petrol. The point was that there was no one to command the fuels. Even military drivers had to help at some point, he said.

– And a similar situation is with sugar, because in our country there was a week in which 1.3 thousand stores from the entire chain did not receive this product. When Poles saw that there was no sugar in a given network, it meant for them that this was a bigger problem. They rushed to buy sugar in other chains. Due to the increase in demand, the price has also increased. The industry maintains the price above PLN 6 per kilogram to this day, he stressed.

Rapeseed oil price increase

Marek Zuber also referred to another product that stands on the podium in terms of price increase. – This is rapeseed oil, which has increased in price by about 50 percent compared to the price from the previous year – he pointed out.

– Here we have a list of various factors. We had a massive price increase in the European market as it escalated war in Ukraine. At that time, we also wondered whether Ukrainian cereals would be available at all. Wheat rose nearly 80 percent in three days. Other cereals have also become more expensive, including rapeseed, he informed.

The economist explained that Ukraine is one of the largest rapeseed oil producers in Europe. – We had a moment when the price of oil increased from approximately PLN 6.5 to PLN 18 per liter. More than triple the price. Then it turned out that these cereals would be available, prices on the markets fell. At the moment, wheat and rapeseed are at the price of 2020 – he noted.

At the same time, he noticed that rapeseed oil in stores still costs about PLN 12. – Including even euro exchange rate or dollar, it is not reflected in the prices we see in Poland or Europe – he stressed.

When asked what are the reasons for the increase, he replied that “if the chains and wholesalers bought the oil very expensive before, they have it in stock today, they do not want to lose it and they use the so-called averaging”.

– If earlier I bought oil for PLN 17 per liter, and now I buy it for PLN 7 per liter, then in total I sell it at such a price so as not to lose money. Meaning, he explained.

He also presented in the conversation the second reason for the increase in oil prices. – The problem is that Poles are slowing down buying and consumption, because real wages have been falling since May 2022. We have a very long period of wage decline, we have never experienced anything like this in 30 years of market economy. However, the decrease in consumption and demand is too small to force a decrease in prices, he concluded.

Read also: The average salary of Poles. This is how much we earned on average in 2022

Main photo source: Shutterstock

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