Oil and water don’t mix. We learned that in high school. And we learned it again when water got into a heating fuel line.
In Alaska, oil and salmon don’t mix either, unless the oil is brushed on the grill before cooking a fillet. However, oil and salmon are in the same boat — economically speaking in Alaska. They both respond to supply and demand.
When global oil supplies can’t keep up with demand, the price of a barrel of crude climbs higher. A shortage — or even a fear, a hint or speculation of shortage — drives up prices for the commodity.
As Saudi Arabia and others have cut oil production, supply is failing to meet demand and prices are moving up. A barrel of Alaska North Slope crude was worth about $90 last week, 25% more than five months ago.
A few years ago, when supply exceeded demand, oil was selling at half that price.
It’s a mixed blessing in Alaska that produces mixed outcomes. While the state treasury profits from high oil prices with increased tax and royalty revenues, individual consumers and business owners pay more at the gas pump, the fuel dock and when they fill up their tank with diesel for winter heating.
Insufficient global oil supply drives up prices until consumers cut back on driving, industry cuts back on manufacturing and diesel-fueled power plants cut back on output to reduce demand and restore balance. Or — resolving the imbalance from the other side — until increased oil production comes into play to match demand and bring down prices.
That supply-and-demand pricing affects salmon markets the same as oil.
When the supply of salmon on the market exceeds consumer demand, salmon prices tank — as they are doing this year.
Inflation has pushed U.S. consumers to avoid expensive protein (fish) when they go shopping, according to the head of the state’s seafood marketing agency. Consumer cutbacks, along with large inventories of salmon left over from last year and a near-record pink salmon harvest in Russia, are making for a very weak market for Alaska fish this year.
Alaska’s commercial fishing fleet is earning a reported 20 cents a pound for chum salmon, down from well over $1 last year and a 10-year average of 80 cents a pound. The sockeye fleet in Bristol Bay started the season at 50 cents a pound, well below last year’s average of $1.39. Southeast pink salmon reportedly are fetching 10 to 20 cents a pound, down from last year’s average of 52 cents.
It’s one of the irrefutable laws of economics. Too much supply drives down prices until consumers eat through the stockpiles of fish in cold storage and packed in cans, restoring a co-existing balance between supply and demand.
Until then, we’re pretty much along for the price ride.
“I would hope that we have reached the bottom,” Jeremy Woodrow, executive director of the Alaska Seafood Marketing Institute, said last week.
To help get the state’s commercial fishing industry off the bottom, maybe individual Alaskans can pitch in and assist.
When friends and family come visit, don’t send them back with boxes full of Alaska seafood. Give them a taste while they’re here, and then pack their luggage with cookbooks and recipes so that they will buy more salmon when they get home.
Sure, they may be cranky at not getting to haul home freezer totes full of seafood. Just tell them it’s the law of supply and demand. Certainly, they want to follow the law.
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