Aaron’s assignment

Market: Olive Oil

Source: http://www.treehugger.com/green-food/olive-oil-shortage-looms-prices-and-demand-rise.html

The quantity of olive oil has declined globally. Due to extreme heat, bacterial outbreaks, and severe flooding, the Mediterranean countries are seeing shortages of olive and vegetable production in this year. For the market of olive oil, the whole supply curve is shifted towards the left. The supply determinant is the number of suppliers, where low crop yields drive companies into production deficits for 2017. Global production of olive oil is set to fall about 8%, due to soggy temperatures, hot climates and bacterial outbreaks.

In addition, the global demand for olive and vegetable oil is growing due to emerging markets, such as China. The massive movement of people towards the middle class calls for an increase in demand for higher quality dishes and food, in order to feed the population. The demand determinant would be found in the number of buyers, increasing the total demand and effectively shifting the demand curve towards the right.

The equilibrium price will undoubtedly rise, due to an increase in demand and a decrease in supply. However, it is unsure how much the quantity will change, either increasing or decreasing. For example, the Britons will have to pay 33% more for olive oil by the end of 2017, and usually high production areas such as Tuscany, Italy will produce 50% less olive oil this year due to a bacterial outbreak.



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