Ordinarily, a giant container ship as long as the Empire State building is high, blocking the southern stretch of the Suez Canal, would have been the lead story on every news channel. Around ten percent of the world’s seaborne oil goes through the Canal; some 3 to 4 million barrels of oil per day – most of it moving north to Europe. Along with the Straits of Hormuz and the Bab al-Mandab Strait at the southern end of the Red Sea, the Suez Canal has been a major concern to security services tasked with preventing terror attacks. This is precisely because of the impact on oil movement that the stranded MV Ever Given is now having. More than 100 vessels are now at anchor in the Red Sea and Mediterranean Sea at either end of the Canal, together with a further 35 in the Great Bitter Lake in the centre of the Canal.
The situation can only worsen as it may be well into next week before the ship can be re-floated. As Sally Nabil at the BBC reports:
“The suspension of navigation through the Suez Canal has created an atmosphere of uncertainty. No-one knows exactly when things will go back to normal. The canal is congested. Dozens of ships are waiting to resume their journeys.
“Experts say that the salvage efforts might work when the tides gets stronger early next week. If attempts to free the ship fail, one of the options would be to unload part of its cargo. But that would take a long time too.”
The alternative route around Cape Hope adds an additional two to three weeks to the journey as well as increasing the costs. And so, most of the shipping will likely remain outside the Canal until the blockage is cleared. As a consequence, Europe can expect oil shortages in the coming weeks – not just from tankers unable to sail north through the Canal, but also because the empties cannot sail south either.
One reason why the establishment media may not be treating the incident seriously is because they are heavily invested in the “peak oil demand” fairy tale; and may actually believe that oil is no longer a strategic resource. If that is so, they may be in for a rude awakening in the coming weeks if the movement of goods – including food – is impacted.
Most likely though, the supply chain disruptions caused by the response to the pandemic mean that oil is just one of a raft of commodities that is in short supply. A year ago, as journalists and campaigners were accusing anyone who opposed lockdown as “putting the economy ahead of saving lives” and “wanting to let thousands of people die,” I warned that:
“Unfortunately, most people – including Guardian commentators – have been conditioned to believe that something called ‘the economy’ exists separate to their/our daily lives. The economy, we assume, is something to do with central banks and stock markets, interest rates and government spending. In reality, these are just the over-complex crud that floats to the top of a global economy that is really about the complex and self-organising global networks of extraction, supply, manufacturing and transportation of everything that we consume from the clean water that comes out of the tap and the food that miraculously arrives on supermarket shelves to the gas that powers our electricity grid and the petroleum that fuels our transport.”
Importantly, there is no beginning and no end to the web of complexity that is the global economy. And crucially – and despite the insane claims of politicians and economists – nobody planned it. The real, energetic, economy is the sum total of everything that eight billion human beings do every day… and you mess with it at your peril.
It is worth noting that there was no question of responding to the threat of Swine Flu in 2009 in the way we reacted to Covid in 2020. We simply lacked the infrastructure twelve years ago. Working from home could never have been considered without the rollout of fibre optic broadband and 5G mobile telephony in the last couple of years. And while possible previously, it was only in the wake of the 2008 crash that the banking system was altered to allow the degree of additional currency printing required to effectively pay a large part of the population to stay at home.
The big failing a year ago, however, concerned our inability to process time. The consequences of not acting rapidly in response to the pandemic were readily visible in the exponential growth in hospitalisations and deaths. But the consequences of lockdowns and restrictions were always going to operate on a longer timescale as the webs of supply chains attempted to adapt to the changed circumstances. The big economic supply shock would not come from the lockdowns themselves, but from the attempt to restart economies in the aftermath.
This is what the USA is currently attempting to do; with the Biden administration’s $1.9tn stimulus package providing the financial fuel to ignite a consumer boom. Instead – at least for now – what the Biden administration has actually created is a massive shortage of goods – some critical, some trivial – across the planet. As Hillary Hoffower at Business Insider explains:
“You might have noticed that you’ve been shelling out more for things like houses, gas, and cars. And it’s been hard to get your hands on things like fitness gear, sofas, and roller skates.
“That’s because America is reopening to a more expensive economy than the one that existed pre-pandemic.
“For now, it has a lot to do with a shortage of materials that manufacturers need to make these things. When supply is low, prices climb for manufacturers, and consumers end up paying more for the end product.”
Like the blockage of the Suez Canal, the winter storm and record low temperatures which hit Texas a few weeks ago are also causing global supply shortages… this time in those pesky single-use plastics that we were assured we could live without; but actually can’t. As Irina Slav at OilPrice reports:
“More than 60 percent of polyvinyl chloride (PVC) production capacity in the United States is still out of operation a month after the Texas Freeze, Bloomberg reported earlier this month. This has caused the price of one of the most versatile products of petrochemical plants to skyrocket to a record high of $1,625 per ton for U.S. exports, according to data from ICIS. Polyvinyl chloride is used for piping, roofing, flooring, cable insulation, siding, car windshields, and car interiors.
“Polyethylene prices are also running at record highs, according to the ICIS data cited by Bloomberg. The shortage is so severe that there is not enough polyethylene to meet domestic demand in the United States, according to chemical industry insiders. And this is happening at a time when the chemicals industry was already hurt by a bad hurricane season.”
US demand for plastics as the US economy opens up is also resulting in plastic shortages across Europe. However, these are obscured by a far more worrying global shortage of computer chips. As Mark Sweney at the Guardian reports:
“Consumers are facing price rises and shortages of products from TVs and mobile phones to cars and games consoles as a global shortage in semiconductors grows.
“The shortage in chips, the ‘brain’ within every electronic device in the world, has been steadily worsening since last year.
“Initially the problem was only a temporary delay in supplies as factories shut down when the coronavirus pandemic first hit. However, although production is back to normal, a new surge in demand driven by changing habits fuelled by the pandemic means that it is now reaching crisis point.”
In effect, just as the economy is adjusting to the patterns of living and working resulting from lockdowns and restrictions, so the attempt to restore national economies to something akin to their December 2019 state has thrown everything off balance again. As search for items in short supply just this week returns shortages of pet food, garden furniture, cardboard, household durable goods and – dare I say it – toilet paper:
“The world really doesn’t need more toilet paper problems. But unfortunately the biggest producer of wood pulp — the raw material for products including bath tissue — is warning that the global crunch in shipping containers could start creating supply snags.
“Suzano SA primarily ships its pulp in cargo vessels known as break bulk. With demand surging for ships that carry ribbed steel containers, the squeeze is starting to spill over to break bulk and threatens to delay the company’s shipments…
“Of course that’s happening at a time when demand for residential toilet paper has gone way up and consumers have taken to stockpiling and panic buying.”
It goes without saying that having thousands of containers on board hundreds of ships anchored at either end of the Suez Canal will have done nothing to ease the shortage of shipping containers around the world. But the greater problems are only likely to emerge when European restrictions are lifted later this year; at which point European firms and consumers will be competing with their American counterparts for goods and commodities that are already in short supply.
Locking down economies turned out to be a great deal easier than most people imagined. But unlocking them afterwards may yet turn out to be the real point of crisis… and far from building back better, we may well find ourselves plunged into the kind of stagflationary crisis last seen in the early 1970s. Except that this time there will be no North Sea oil to bail us out.
As you made it to the end…
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