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A quick question

Now that the price of oil is like the lowest in 16 months does that mean McDonalds, Burger King, KFC and Hardees will drop their prices? Will products at Sultan Center cost the same as they did 16 months ago? I think it’s only fair that if they raise the prices because oil prices are up then they should drop the prices when oil prices go down.

54 replies on “A quick question”

I dont think so…the compaines wanted these prices to go up why would they want them to go down now. Remeber the 50kd increase in salaries and all these also had a effect on the economy not only because of the oil.

i just saw your blog in the time that i noticed things and i was wondering ,i was in sultan center and the price of their “sultan brand ” tissues became almost 200 fils more than two months a go , my sister in law was in vavavom tonight and the prices of the creams became more and when she asked them why, the seller told her that because”the euro became high” and she had big argument with her about this .So we were wondering how come that the oil prices is down and things getting more expensive ?And do you really think that the prices will go down ? Dont think so cause they want to get what they lost in the stock market from us !

i remember the way they used to “explain” it to us in canada when the gas prices never went down, even when the price of oil decreased — they had bought the gas at the “high” price, so they had to continue to sell THAT stock at a higher rate, not lower it for the customers. And by the time they were ready to have the gas supply replenished, well — the prices had shot up again!! Therefore, “somehow” lower prices were never passed on to the consumer….
:S — the little guy just can’t seem to win against “the man”.

The prices WILL go down. They have to because of competition. If Burger King drops, Micky D must drop or they will lose business. The last thing these joints need is a price war.

Capitalism at its best 🙂

Nobu — i would absolutely love to see competition drive prices down, but i’m a lot more used to seeing a silent agreement among businesses that allows them to keep selling at a higher price. If no one ever lowers their prices, then they can continue to sell high. And you’re not likely to see one maverick amongst them that is willing to take the risk of a lower profit when larger chains will continue to cover the loses that may be incurred from some people boycotting them for a couple weeks.

In the Middle East, definitely not (especially McDonald’s and whatnot). In the US, probably yeah…

If you noticed, for the last couple of years McDonald’s only increased their prices when oil prices increased, but never decreased their prices when oil prices decreased, did they ?

I think prices will drop purely because there will be less money moving around. Not necessarily because of the price of oil. But because of the market crisis in Kuwait. Less money in the hands of individuals, less buying, prices move down to accommodate them. You can begin noticing it in shopping malls, less people are going, and that will keep on going for a while.

But look at the bright side! People were complaining of inflation, well you don’t have to worry about that now.

I have never seen a defletion scenario, except on a tire. Prices will remain the same, maybe few item might drop, however as long as consumers are paying the price and there no significant drop in sales, retailers will not change their pricing policy.

“The prices WILL go down. They have to because of competition. Capitalism at its best :)”

Or a cartel at its best?

McD: Hey, Burger King. If you don’t lower your prices, we won’t lower ours either!
BK: OK! This way we both make tons of money.

Gillian,

There are three forces at work here: 1) lower transportation costs due to the drop in oil prices. 2) a global recession, and 3) competition. If the cost of producing a Big Mac is down, the company must lower the selling price, otherwise Burger King will be more than happy to launch a “we are bigger and cost less than Mikey” campaign. The lower prices have a lag time after the price of oil drops. The scenario will start in a month or two in the shape of special offers on family meals…etc. Then the prices will eventually meet the demand.

Fast food chains don’t have an OPEC like body, so I doubt any price fixing practices will be forthcoming.

Cheers

take into consideration that companies had increased its employees salaries and benefits in addition to all other expenses that had increased. so oil is not the only factor that would affects prices and we don’t want companies to drop down salaries again ( against labor law)

There was a very informative article about this on CNN. It directly answers your question. Try search for it on CNN.com

mcdonald’s just increased their prices up again about a month or so ago. A sausage mcmuffin breakfast meal is now up by 50fils to 950fils. Two years ago it was 800fils.
prices will only go down due to competition, however, in Kuwait competition Is amost nonexsistant.
in most doveloped countries monopolies are not just frowned upon, but are deemed illegal, and seen as evil. These governments encourage and help set up competition and have set up independent “watch-dog” associations and bodies that constantly look out for companies that unfarely manipulate prices and monopolize. Sadly, the opposite is seen here in Kuwait, where the government only allows one company to control one brand and protects the monopolizers against competitors…
what’s even more bizarre is that most of these culprits are or have been members of parliament at some point in time.

We were discussing this exact topic a few days ago, and it basically came down to one thing only. Nothing to do with oil prices, nothing to do with recession, nothing to do with the stock market and salaries.

It all comes down to supply & (mainly demand).

If you own a shop and sell your merchandise at a high price, and people keep buying, why would you lower your prices, i wouldn’t, nobody would.

The only way to drive their prices lower is to stop buying the product, plain and simple.

i was in The Avenues today and EVERY Starbucks was full, so why should they lower their prices? You want to put pressure on them to lower their prices, STOP DRINKING 2KD COFFEE!! Same goes for everything, fast food, cars, electronics, houses, you name it, you want prices to go down, stop buying the product at those high prices.

I agree with Mishari 100%…Trust me nobody here in the states would drink a grande coffee from starbucks that costs 6 bucks which is 2kd in kuwait. Thats why the Venti here is 4 dollars. 1.300 dinar its so cheap and thats a white mocha. Mishari has a point…stop going there and the prices will go down.

When will kuwaitis stop buying branded food and items? NEVER. i salute the saudis for staring a moqataa (boycott) campaign on all of them famous brands and making a site, a newsletter and a forum for that to beat them greedy sharks.
I agree with Mishari and Nelson. Boycott has always been the solution. When Starbucks opened up at our college town in the states, it was opened in Barnes and Nobles, a very small outlet, hardly 3-4 tables and hardly u see ppl there, except those who are into reading and drinking at the same time. Why? because everybody stuck up to our local coffee stores run by the community, and we did make starbucks regret opening there.

First of all it might be better to switch to more healthy food instead of MacDonalds. It will decreases heart related problems, diabetics and overweight. Why should MacDonalds drop prices anyway? The transport cost will go down only a little bit and for a relative time. On the other hand will barrowing money for new investments and exploitation costs be more expensive because of the higher risks and lack of trust that banks have in eachother. That the inflation will rise is most likely, which results in that your money will be worth less. In a time of expected worldwide recession/ depression, stocks won’t have an estimated/speculated value anymore. Recovering of the stock exchanges and trust (providing loans) between the banks will take some time. No real reason for panic yet, but Cash will be King in the next period. The interests on savings, especially from solid National Banks of strong countries, offers at the moment the best security against inflation.
So to answer your question, I don’t expect a cheaper burger.

The price increase didn’t hurt them. They’re just greedy thats why they increased their prices.

Hardee’s for example, increased its prices before the oil prices went up. And then when every one increased their prices, Hardee’s increased the delivery charges, increased the meal charges, and started to charge extra for the content of the sandwich (for example cheese cost extra in a sandwich that SHOULD have cheese in it!)

Isn’t there like a public or even private consumer rights committee here in Kuwait ? I think one is needed and should be involved in monitoring such subjects, that is if the corruption (wasta) didn’t hit there too.

High oil prices will accelerate economy cycle which will impact the inflation rate that causes the increase in prices, if oil price go down, the inflation will remain but at slower rates.

Exactly this is what is causing the economy crises in the US and the rest of the world. (in my opinion)

IF you and me , and everybody stop eating their , buying from sultan center they will drop their price for sure.

Nobu,

Your thinking would be valid in an actually free market which doesn’t exist in Kuwait.

There is no incentive for a producer to drop their prices if they can readily sustain the high prices along with their competitors.

The oil price has collapsed by OPEC is already moving to cut supply and increase the price artificially again, they are aiming to sustain a sub 100 dollar price.

Thus this will only continue.

Inflation in the Kuwait economy also means that the high prices are here to stay.

Boycott fast food joints and provide your children with alternative recreation (than pacifying them with a mind-numbing unhealthy choice) .
That would soon bring prices down.

TSC: as long as people will be willing to pay, you will not see prices go down

No way are the vendors of any intl. product conglomerate going to reduce their prices, they will compensate the western market losses with the local market prices here in kuwait which is already hicked…………………. – “make hay while sun shines”-

Once you start screwing, you cant stop it and similarly once we start getting screwed, it does not stop either. So we have to live with it.

I was getting my car serviced last week at Al Sayer and they have just put a customer notice up in the waiting area stating that the cost of servicing has had to be increased due to “rising oil prices”
I pointed out that oil prices were falling, not rising. Unfortunately, the man who worked there then decided he no longer spoke English, (despite having a conversation with me in English a few minutes before!)

As for McDonalds… Does it piss anyone else off that they always ask if you want a large meal? Then, when you say no, they say, ” Okay, just a medium meal.” Then, you have to request a regular meal. Idiots.

I’d like to clear up something about my comments yesterday.

I wasn’t implying that people boycott any one place or store, what i was simply saying is, if you think the prices are too high, don’t buy the product, if enough people do that, the price will have to go down or else the store is stuck with goods nobody wants to purchase.

Especially, with many of the things we are talking about, these products are not essentials, they are not medication you absolutely need, or food you have to eat, so it would not be a big deal if you were more considered in your decision to purchase them, if you think the price is too high, stop buying, don’t make the purchase then grumble about coffee/fast food being too expensive.

I recently bought an apple tv, but i didn’t buy it from Icity or Digits or whoever else sells that stuff here in kuwait, why? cause it cost something like 180KD for a product i got for 99KD from the states, i’ve read in a few of mark’s posts that he does the same, and we all should, that is the only way to fight this madness with prices.

Go to Toyota’s main showroom in Al-Rai, look at the amount of people there to buy the new land cruisers, you’d think Al-Sayer was giving them away for free. Toyota has always been about providing top quality reliable cars at very affordable prices, now a land cruisers costs 18,000KD and they’re selling every last one of them. (This is an exceptional case since al-sayer refuse to service or guarantee a car not purchased from their dealership, but how the government and toyota japan allow this i’m not sure, but people are forced to buy it from the dealer here or else).

At UK PMSL –> Yeah I’ve noticed that ever since they started their franchise over here back in the 90s. Trust me on this one, there is NOTHING absolutely nothing you can do about it. These guys are programmed to say the following words as soon as you enter any Mc Donold branch. “Hello and welcome to Mc Donolads. May I take your order?” As soon as you say… not a meal but like lets say a sandwich for this example or anything small (except for the ice creams) they will automatically follow that with the following words.

“Would you like a large meal?” and if you said no they would then go with medium. They never ask you “What size would you like sir or madam?” It’s all from large to small. Believe it or not this is a marketing strategy. The only reason that people go to Mc Donolds is because of their quick and high qulaity service. From greetings the customer to ending the order and redirecting the customer to wait or to take a seat and they will bring in the food for them. If you go to any other fast food restaurants like Hardees for example or KFC they won’t and won’t do it as good as Mc Donolads.

Prices will not go down as quick as oil prices. Oil prices affect global food prices by means of transportation cost and production cost. However there are other factors that affect food cost and most people are not aware of that. The most important factor is global warming and its effect on droughts and floods. This causes crop failures and thus reducing the available supply. Global inflation caused by an over heated global trade also contributed to higher prices. Increase in world population although less dramatic, has a major impact on demand.
Now how does this translate in the prices of McD’s? It takes some time until these factors filter through to the final product. Also there is usually a delay in price adjustments between the time the suppliers get the lower food cost and the time that value is being passed on to the restaurants and thus the consumers.

Stop shopping TSC, start shopping LuLu or Carrefour. LuLu’s produce is tons better than TSC and I’ve yet to get rancid chicken from there. Also cheaper on staple goods.

Mark: Seriously. ‘if they raise the prices because oil prices are up then they should drop the prices when oil prices go down’

Where do you get your financial info?? I will be kind and give you a free lesson.

Inflation is the reason prices are up. Oil prices only play a small role in all this. In the US the Fed looks are core inflation, so food and energy dont play a role in the numbers they post. While in the EU headline inflation is what the ECB looks at when determining interest rates.

Food prices have been on the rise as well which is the prices are up. Transportation costs due to oil prices is a factor but it doesnt make up a bulk of costs.

I might accept if you said wealth creation due to higher oil prices creates an inflationary environment but you would have to convince me that the petro dollars are in fact trickling down into the economy.

Please email me if you would like to discuss. Leave the finance for the finance ppl.

Hey mr know it all take a fucking chill pill. It was a question asked by a regular everyday consumer. If you don’t find our level of finance knowledge up to your standard well thats because we are not finance people just regular people. No need to come in and ridicule us.

@b…… Spot on… I was just about to unleash hell towards how people assume finance is like math!!…..Well its not; and as correctly put by “b”, “Inflation is the reason why prices are up”…

Very soon the emergence of an active information exchange over the internet may be just around the corner, and people will finally realize why they should learn more about that colored paper in their wallets!!!

@Mark: Dude….. ease up there bro, What “b” is trying to say is that on a blog like yours where people are influenced, you should gather a little research before you write up on issues. Thas all man….dont see it as being ridiculed, see it as a learning venture towards something new that you could know more about.

I’m sure you do some serious research on things that matter to you and whcih may be interesting; like wise, finance is something that used to have a tag line “I have no idea what these boring number crunchers are talking about”….. now, every one is exposed to more.

Take the GBK issue for example, If people knew what a derivative trade was (As simple it may be put), they would realize that there was no point in cashing out on their savings, salary and current accounts…There would have been no confusion at every branch…etc.

Its all good @ the end of the day. Always keep learning..it never ends.

Thomas: If you notice my post was not telling people to unite and start a boycott or a riot. I also wasn’t advising people on business opportunities or telling them which stock to buy and how the world financial market works.

My post asked a simple question that was being asked by a regular person who knows very little about finance (me). If the prices of food went up because of oil (thats what they were telling us), shouldn’t they go down now because oil prices are down?

Didn’t you say I should learn and learning is good? How can I learn without asking a question? B would be a terrible teacher for example because if every time a student of his would ask him a question, B would make fun out of the students lack of knowledge.

I dont think it will drop any, since the Oil prices are in dollars, and when the oil prices dropped, the dollar became stronger against the EURO and other currencies which at the end off sets everything.

@Thomas: Thank you for making things clear. You are right it is not my intention to make fun of anyone here, although i dont support ppl who spread false information.

@Mark: you should chill bro. nobody is ridiculing you in any way. but as Thomas mentioned, given that you are ‘influential’ and so many many people follow you blog blindly some facts need to be checked before they are posted. Next thing you know ppl will be protesting outside McD’s asking for a cheaper happy meal bcz oil is at $ 50. I mean who was telling you that they raised prices bcz of oil?? maybe you should stop listening to that person. I think I am a great teacher and many ppl will vouch for that. You are upset bcz i came down on you for an assumption you made based on information you got from someone. So technically it was directed at that person. No hard feelings man, ill still break bread with you at marzouq’s 🙂

@Mark & b,

Guys, c’mon…. if you know something more that the majority, consider it a duty to educate…lets not be a part of a knowledge extension envy!..

@b, I read your article on your blog…alhamour.com, well written for laymen, lets follow that pace;

@Mark, wikipedia has some good stuff on Finance and related derivatives.. its awesome. I’m personally an Information forensics and security Guy….for Banks and investment companies. I took a week off just to understand certain financial instruments. Very Very interesting!!!.. Sometimes you will feel as though if you had known this earlier, you could have questioned a COUNTRY’s policies on financial regulations.

You never know, once the crisis gets untangled, normal people who have no knowledge about finance may raise a few valid issues where some analysts might say>>>”Fcuk!!!! the people know…!!”

‘if they raise the prices because oil prices are up’ there is an inherent assumption in that statement.

I dont like soup. More spring rolls for me!

Plus i think that we have come to the conclusion that the guy/source that told you food prices are related to oil prices. You should find them and shoot them.

Mark, I swear I had the exact same question you do. I would really like to know why prices won’t come back down as well… I’m just curious.

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