The Increase in Prices of Commodities Indicates the Global Interconnectedness of Markets
| Supply and Demand
| It all has to start somewhere. The global increase in demand for raw inputs—fuel, energy, steel—has created an increase in demand in other markets as well. And there may not be an end in sight.
Fueled primarily by growth in developing nations such as India and China, demand for raw inputs has skyrocketed. Copper has tripled in price over the last five years; zinc has doubled in that time period; steel has increased as well. As China and other nations rush to increase their industrial output, they have increased both production and consumption of steel. China, once a dominant exporter of steel, is now an exporter and the largest consumer of steel. It now has over 7,000 factories, double what it had five years ago. And each factory needs electricity, which increases demand for coal and other forms of energy.
As their workers see their incomes increase as a result of the factory work, their demand for agricultural goods, such as wheat, and other items, such as cars, will increase. This taxes the markets for raw inputs even more. And as demand for cars increases, so will demand for fuel, already in tight supply. Because it becomes more expensive to find oil to produce gasoline, the price for gas will increase as well.
As the price of fuel increases, countries such as the US will turn to alternative forms of energy, such as biofuel. But this taxes the agricultural market also, as corn and other items used to produce biofuel are now taken away from food production, or away from an alternative use such as cattle feed. This increases the price of corn, beef, milk, and other foods as well.
People like to suggest that we live in a global village. It appears that the global village is getting larger, and the area around the village is getting smaller, all the time.
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