Unravel the mystery of the economy | Unique prices around the world

Every Saturday, one of our journalists at a professional company answers one of your questions about economics, finance, markets and more.

Posted at 9am

Helen Barril

Helen Barril
press

Hi, I would like to know if there are non-petroleum products with fixed prices in the international market and why.

Mark Brassa

Many products are traded at different prices depending on supply and demand around the world.This is called a merchandise, or merchandise In English, it is widely used in the industry or consumed everywhere.

The best known are crude oil, iron, copper, aluminum, and foods such as wheat and coffee. But there are many others, such as gold, lumber, and paper.

“The most homogeneous products, that is, products with minimal quality differences or where the origin is not an issue, are those whose prices tend to be determined by the global market,” explains Professor Nicholas Vincent. Department of Applied Economics, HEC Montreal.

It is a homogeneous product that can be easily transported without sacrificing quality, such as oil, grain, ore. Other less homogeneous products, such as pork, are also traded on the stock exchange, but the professor has designated these markets to be more local, for example North America.

The buying and selling of these commodities in the international market shows their value based on supply and demand. This is the foundation of capitalism.The first centralized commodity exchange dates back to 16 yearsWhen 1st century in Antwerp, Belgium.

The producer of a good wants to sell it at the best price possible, and the person who wants to buy it wants to sell it at the best price possible. It is this balance between producers and buyers that makes it possible for commodity markets to maintain.

Government intervention

The country of origin can very well regulate the prices of essential products for a variety of reasons. Therefore, some countries subsidize the price of wheat so that people can eat enough. Some oil-producing countries are subsidizing gasoline for economic development purposes. This is the case in Venezuela, where the price of a pump is one of the cheapest in the world.

Conversely, in Norway, which also produces oil, it is sold at world prices and gasoline is highly taxed, so pump prices are among the highest in the world.

In Canada, there are calls for government action to regulate pump prices, which have risen sharply since the beginning of the year. The mistakes that the Government of Canada has already made in the 1970s recalls Jean-Thomas Bernard, an energy expert and professor at the University of Ottawa.

First, he says, lower prices will increase consumption. The country then loses the income associated with the market value of the product.

Imposing Canada’s internal prices below world prices does not change the actual cost of oil consumed in Canada. That would be a net loss for the Canadian economy as a whole.

Jean-Thomas Bernard, Energy Specialist, Professor, University of Ottawa

Capping or subsidizing products whose prices are fixed in the international market deprives producing countries of higher incomes from exports and makes them poor.

Call all

Do you have questions about personal finance, the world of work, the stock market, finance, technology, management, or other related themes? Our journalists answer one of them every week.