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Worldwide Shortages and Price Rises.

Posted on 20th October 2021

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The information in this post is culled from this report from the BBC, this report from the BBC, this report from Reuters, this report from the BBC, this report from The Atlantic and this comedy sketch from The Late Show.

Basically, there are worldwide shortages of huge range of things, and price rises in many markets.

Due to supply chain issues, there are shortages in the USA of fish sticks (fish fingers to Brits), frozen and ready-made meals, toys, sweets/candy, wine (apparently due to a shortage of glass bottles), and Ben & Jerry's is only making a reduced selection (due to shortages of ingredients). There are also shortages of toilet paper, paper towels, bottled water (which, in the USA is usually uncarbonated, and so unrelated to the CO2 shortage), new clothes, pet food, prescription medicines and canned-food, test kits, car parts, semiconductors, ships, shipping containers and even workers (truck drivers, factory and warehouse workers).

The is a global CO2 shortage. CO2 is used to carbonate drinks and pump beer and other drinks in pubs, to promote the growth of plants in greenhouses, to stun pigs and chickens before slaughter, for packaging meats, baby foods, fresh foods and baked products (CO2 extends shelf life by preventing bacteria), to keep food fresh in transport (CO2 is used in the form of dry ice and snow), amongst other things.

Petrol Queues Empty Shelves

There is a worldwide shortage of energy supplies (oil, coal, natural gas, propane and electricity) leading price rises in the USA, Europe (including the UK) and Asia. In the case of natural gas in the USA and UK, this is partly simply due to bad planning: having insufficient stockpiles. China is especially hard hit, with a coal shortage leading to a shortage of electricity, which is having knock-on effects in the supply of manufactured goods (paper, food, textiles, toys, semiconductors chips, etc.) around the world. India is nearly as badly effected.

Shortages of semiconductor chips from countries such as China, Japan and South Korea, are causing worldwide shortages of cars, phones, computers and 5G phone network technology. It is a really bad time to buy a new computer, or to upgrade your RAM or graphics card.

Britain, hit with the double whammy of Brexit and COVID-19, is facing an acute shortage of truckers, butchers and warehouse workers that has exacerbated global supply chain problems. As a result, Brits have had a petrol (gasoline) supply crisis, run the risk of serious shortages in the shops at Christmas and are facing widespread price rises.

Although politicians and business leaders keep quoting reasons such as the COVID-19 pandemic, and Brexit for the shortages and price rises, at least some blame lies elsewhere. Over the last few decades, business has become more global, meaning longer and less robust supply chains. When everything is working, this results in cheaper goods, raw materials and fuel, but when there are other pressures on the system, as there are now, the system collapses, as we are seeing now. As an example, look at meat supply. China, Brazil, the USA, Argentina, Australia and New Zealand are all big meat exporters, and their markets are most of the planet removed from production. This is another reason to "buy local".

Manufacturing industries' love affair with JIT (Just In Time manufacturing and supply) is another factor in the current crises. Companies have embraced this approach, to reduce the costs associated with keeping parts and material in stock; stock levels have been reduced over the last two decades at retailers, finished goods manufacturers, wholesalers, distributors and sources of parts and raw materials. This has resulted in lower prices to consumers, but now we are paying the price in the form of shortages. The same principle has been applied to stocks of natural gas and other fuels, with lower stock levels responsible for shortages and price rises in The UK and the USA.

Things are not looking good at the moment, and will take a year or two (or longer) to stabilise, if ever. Industry needs to look again at the balance between price and supply resilience. It is probably not an optimal time to start a new business, because the price and availability of premises, energy, ingredients, parts and labour is very unpredictable, making cash-flow planning and profit and loss analysis almost impossible.