So what do paper and oil have in common?

November 28th, 2008 | Uncategorized

Good question, I hear you ask – well, here’s a clue….. it’s to do with recession!

Now, I don’t claim to be an expert in commodities (otherwise I would be making millions as a trader), but the thing that I do know, or have read, is that the price of certain products has collapsed in recent months. Of course we are all familiar with the story of oil – touching nearly $150 a barrel in the Spring of 2008, and losing two thirds of it’s value since then, now trading for around $50. Quite rightly, the thing that always puzzles (and annoys) most consumers is the delay in any price drop reaching the pumps – needless to say the petroleum companies always have their excuses, sorry, explanations, to justify this.

So why would I mention this on a wine website? Allow me to explain:

In the last twelve months the prices of many of our dry goods (corks, capsule, bottles etc) have increased by much more than the rate of inflation, but none more so than our cardboard cartons. The reason is apparently down to supply, demand, and the price of re-cycled paper. As long ago as 2003 the price of paper started to rise sharply, brought about by the shortage of re-cycled material and the increasing demand from the booming Far Eastern markets. The Asians were quite simply willing to pay more for their paper.

However, this growth in demand has now beeen stopped in it’s tracks by global recession – some parts of Europe that were exporting as much as 70% of their re-cycled paper to the Far East, now find themselves sitting on huge stockpiles, and the price has virtually collapsed.

Now, not many consumers will have noticed this as they are not directly affected in the same way as they are with fuel. I, on the other hand, took the first opportunity to confront my carton supplier….

Whilst he was obviously aware of the drop in paper prices, he was only able to offer a very feeble excuse as to why he was not reducing his tariff, and whilst he may feel that he was able to fob me off, rest assured he will not get off quite so lightly!

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