Reducing Consumption is the Way Through Raw Material Volatility

The ongoing conflict in the Persian Gulf presents a stark reminder of the global economy's vulnerability to supply shocks, particularly concerning vital energy resources like oil and gas. Kamil Sobolewski, chief economist at Pracodawcy RP (Employers of Poland), articulated this concern, highlighting how a sudden drop in supply, met by inelastic demand, inevitably leads to price surges. This price increase, he explains, is not arbitrary but a necessary market function to curb consumption by those who can least afford it or are least dependent on it.

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This conflict is another supply shock for the world economy. It consists in a sharp decrease in the availability of goods. In this case, it is oil and gas. And demand cannot react elastically. Therefore, a deficit of products appears.

Sobolewski points out that while such conflicts create winners, such as the United States experiencing increased oil and gas exports, they pose significant challenges for import-dependent nations like Poland. The Polish government's response, he suggests, should move beyond merely subsidizing consumer costs. Instead, a more strategic and sustainable approach would involve implementing a nationwide program aimed at reducing overall consumption.

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The price is going up to force a reduction in consumption by those who need the raw material the least, or those who can pay the least for it. The price increase is just a market way of solving this issue, who has to give up their consumption.

From a Polish perspective, embracing such a strategy of "resourcefulness" or "saving" could be a game-changer. It would not only mitigate the immediate impact of external shocks but also foster long-term economic resilience. This approach aligns with a broader national interest in energy security and self-sufficiency, reducing reliance on volatile international markets. While Western media might focus on the geopolitical implications or the immediate economic fallout for major economies, for Poland, the emphasis must be on building domestic capacity to weather these inevitable global storms.

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There are also winners in this situation. For example, the United States' exports are growing both in volume and through higher prices. And for Poland, such a wise strategic approach would be not so much to compensate people for rising prices, but to introduce a nationwide program to reduce consumption. If we could save, we could permanently immunize ourselves against such shocks.