Oil and food crisis: A Kitchin cycle?

In the 1920s, Joseph Kitchin discovered a short business cycle of about forty months (40) or three (3) years. To his credit, it is now popularly known in the business world as the “Kitchin cycle”.

This cycle is simply reaction-driven. It is accounted by certain time lags in information affecting the decision making processes of business firms. As we all know, firms normally react to the improvement or any betterment of a commercial situation by increasing production output through optimization of the capacity of their capital assets. Consequently, in a given duration (say, from a few months to about two years) the market gets swamped with goods or commodities with quantities that are becoming gradually excessive.   As a result, supply exceeds demand. Naturally, prices drop as the produced commodities get accumulated in inventories. Therefore, as a normal reaction, entrepreneurs will find the necessity of reducing output.

This entire process, however, takes some time. It takes some time for the information that the supply exceeds significantly the demand to get to the businessmen. Moreover, it takes business decision makers some time to check this information and to make the decision to reduce production. More time is also necessary for their decisions to materialize. Yet, after this period of reduced production, a new phase of growth of demand, prices and output follow.

Today, oil and food crisis pervade. Whether this is a result of the so called “Kitchin cycle”, no one can be sure. As the cycle has suggested, time lags in information prevents us from ascertaining whether or not we really are in such fix.

Admittedly, the most dominating and most debilitating word today is crisis. Be it in food, power or water, this is the most famous word every tongue speaks. These crises are prevalent, felt and withstood till near submission by every citizen. Quite frankly, unless we become masochists, we will never get the feeling of contentment from the consequences of these menaces. In fact, as we speak, the oil crisis has worsened and is helplessly felt all over the country.  

It can be recalled that 2008 saw the rise of oil prices to US$147.00 per barrel in July. Knowing fully well that it was just at US$70 per barrel in August, 2007, simple math tells us that it doubled in less than a year. Then, we were witnesses on how it plummeted to US$37.00 per barrel towards the end of 2008. Today (about forty months later), however, oil prices are again breaching the US$100 per barrel barrier. Seemingly, though aggravated by the political instability in the Middle East and North Africa, the “Kitchin cycle” simply exists.

Intriguingly, however, 2008 also marked a severe rice shortage in the country. To recall, the long queues on National Food Authority (NFA) retailers, labor sector’s demand for wage increases, cause-oriented groups’ rhetoric and oppositionists’ tirades were the scenes that dominated the news then. The main reason – soaring prices of rice remained unabated.

While the labor sector’s and the consuming public’s pleas were all reasonable, as usual, cause oriented groups and government critics (though consumers themselves) were seemingly riding on.   They were castigating the administration no end, trying to paint before us the government’s ineptness in handling this crisis. As usual, they amplified or exaggerated it to gain sympathy and advance their own political or selfish causes.

Expect, therefore, for these sights in our streets in 2008 to happen again. To recall, we were then in the receiving end of the utility operators’ and drivers’ shenanigans. Obviously infiltrated with ideologues, these bunch of bullies were harassing sensible drivers who continued to ply their routes. Feeling ignored, these thugs resorted to throwing metal spikes in the middle of the road to incapacitate the non-striking drivers’ units.

Consequently, classes were suspended. Some workers arrived late and others went on leave. As the day ended, long queues in several intersections were ordinary sights. Carbon and other satellite markets’ crowds were relatively scarce as most diehard patrons were immobilized.

Sadists that they are, these ruffians rejoiced in all those inconveniences we were in. They were trumpeting here and there about how successful the transport strike was. They rejoiced without realizing that in doing so, they successfully pulled the school children a day back to illiteracy and further impoverished the families of ordinary employees who were not able to earn for a day.

Such strike, like many others before that, did not only bring us inconceivable discomforts. It also dealt us immeasurable losses brought about by economic inactivity.

Indeed, aggravated by the oil crisis, it won’t be remote that the same scenario will happen again. But, whether or not, it is on account of the “Kitchin cycle”, we certainly doubt. One thing we are quite certain though, just like the broader issues on poverty, we’ve never seriously came up with solutions that shall address this concern. 

Consequently, when crisis looms, we are severely hit. Crushed and mangled, all accusing fingers are pointed to one direction – poverty. Making matters worst is our propensity to focus on poverty at face value not its roots. Naturally, whatever initiatives we try to implement could not even put a tiny dent in its surface. 

In our solitude, we can even wonder if all these acts are deliberate and are just orchestrated. The possibility that our government leaders are not seriously considering any solution to free them (the poor) from bondage would, in fact, even be a big truth. After all, having poverty makes it handy for politicians to have a platform in every election – poverty alleviation.

Undeniably, the oil and food shortages are the more telling in all our woes. However, all these years, these concerns have been provided with temporary solutions.   For food, the temporary solutions are a combination of rice importation and government subsidy through the National Food Authority (NFA). For the oil crisis, it is so far limited to subsidies. These initiatives as solutions are mere perceptions. It is just like a painkiller prescribed for a cancer patient. It might take out the pain momentarily but not cure it. Precariously, these temporarily solutions are disguising as permanent. Worst, our government executives are embracing it as such. 

Obviously, therefore, the oil and food crises we are in today aren’t consequences of the “Kitchin cycle”. These crises are long and flatly permanent and shall need permanent solutions.

Thus, once and for all, let us seriously look into the crisis besetting the country today. Then, we shall see if we do or don’t have programs that are supposedly designed to address them. Knowing that these crises are either man-made or due to man’s negligence, some proposals are probably now being deliberated to reinforce what had been done so far.

For your comments and suggestions, please email to [email protected].