Soon, our neighbors in Morgan City will have their annual Shrimp and Petroleum Festival. The forces of supply and demand may keep things less festive than last year.

Shrimp prices are down from last year. Now, shrimpers claim that foreign producers are dumping, that producers from other countries are selling shrimp below cost and flooding the market. This is the same allegation against the Chinese made by crawfish producers last year.

I argued then, as I do now, that it makes little sense to sell below one’s own costs in the crawfish market, because the crawfish market is very easy to get into. The only time it makes sense to dump, to sell below one’s own costs, is when one expects to drive out competitors and then raise prices. Raising prices after driving competitors out can only be done when it is difficult to enter the market in the first place. Neither the crawfish market nor the shrimp market are difficult to enter.

The shrimp market is different from the crawfish market in one important respect, though. Producers in the crawfish market are mostly in Louisiana and in China. Shrimp are produced worldwide, with the U.S. importing shrimp from about fifty countries.

Dumping shrimp to drive out Louisiana producers would involve a worldwide conspiracy to drive out one relatively small portion of the producers, which would do little to raise prices. Shrimp prices are lower because of greater supply from a warmer winter. No worldwide conspiracy.

Are Louisiana shrimpers at some disadvantage compared to foreign shrimpers? Probably, but the disadvantage comes more from U.S. laws which require turtle excluder devices, known as TEDs, which cut production for the same costs by something like 20 percent. It is important to protect endangered species, as it is important to protect the well-being of our citizens. How far we go to protect one or the other is a matter of democratic choice.

Oil prices have also taken a big drop from last year, by about thirty percent. A drop that was bound to occur because the rebound in the oil sector of our local economy has been due to technological developments which have reduced production costs.

As long as it costs less to produce another barrel of oil than what producers get from selling another barrel, producers will expand production. To get consumers to buy those extra barrels of oil, producers must all drop their prices. Lower production costs translate into greater supply which eventually translate into lower prices for consumers. The drop in oil prices was inevitable.

Added to the increase in supply that South Louisiana is part of is the expectation that one of the Middle East’s major oil producers, Iraq, will soon be producing and selling oil again. An increase in future supply means lower prices in the future. With lower prices expected in the future, there is less to be gained by holding onto to oil, so the speculative demand for oil drops now.

Prices adjust because of supply and demand. Oil prices drop when we find cheaper ways of producing oil. Shrimp prices drop when nature increases their abundance. Neither is the result of dumping or conspiracy.

Making unfounded allegations of dumping and conspiracy merely wastes time. Instead of wasting time, go to the Shrimp and Petroleum Festival in Morgan City and pass a good time.