INCORPORATING COLD CHAIN
INTERNATIONAL NEWS
Fuel prices on the rise
Fuel prices are rising rapidly . Long gone are the days of 2020 and cheap fuel with roads and airports relatively empty due to Covid-19 .
As the world learned how to accommodate safety measures put in place to combat the spread of Covid-19 , energy demands rose in 2021 , causing prices to increase across the globe .
TIGHT FUEL MARKETS Prior to the escalating situation in Eastern Europe , the global fuel market was already having trouble satisfying global need . As western countries made plans to switch to greener solutions , drilling companies slowed production in the US and investments in new wells dived .
Overall oil inventories were also falling rapidly , with OCED industry inventories being around 4 percent below their five-year average in July 2021 , according to World Bank insights in late 2021 .
Further challenging the market is that some key producers of crude oil and fuel exist in unstable environments . Countries like Ecuador , Kazakhstan , and Libya have been plagued with natural disasters and political turbulence for years , hindering output .
CONFLICT AND INFLATION Russia , as the world ’ s second largest producer of oil and natural gas , supplies much of the world with their energy . The EU , which gets 40 % of its natural gas and 25 % of its oil from Russia , and Asia , is reliant on Russia for supply . Given this weighty role played by Russia in global production , oil prices have risen dramatically , given the uncertainty caused by the conflict between Russia and Ukraine . Today oil prices are at levels not seen in almost a decade . JPMorgan Chase & co . warn that any disruptions in oil flows could send oil to USD185 a barrel . A lengthy conflict in Eastern Europe could further add to rising prices of crude oil .
Because of the conflict between Russia and Ukraine , Russian petrochemical products are being sanctioned against , which in turn has sent market prices higher . Supply chains may need to be reconfigured around alternative supply points where production is still viable , such as American drillers stepping up their output and helping to ease the economic turmoil the world may face .
Other key producers , like the OPEC countries , are also increasing their production . As energy prices rise , US fracking production will increase , and we can expect that greater volumes of Liquefied Natural Gas ( LNG ) will be shipped to Europe .
SUPPLY CHAINS AFFECTED As the situation in Eastern Europe continues , supply chains are further disrupted . By choosing to omit oil and gas supplies from Russia , some production processes are no longer as easily accessible , due to missing raw materials such as crude oil , or are no longer financially viable as the cost of oil and gas rises .
As diesel prices rise , so do other costs . This ripple effect will be felt across the world . European consumers will most likely experience rises in heating , gas and gasoline bills . Disruptions to global fuel supply chains may also affect food prices , increasing insecurity in poorer communities across the globe as well as economic protectionism .
THE RIPPLE EFFECTS Given rising energy prices , the search for cheaper options will intensify . Cost effective options include : liquefied natural gas in Qatar and around the Gulf of Mexico , US-based LNG from fracking , and sustainable energy offerings in offshore wind farms and solar energy parks .
With more costly fuels , the cost of cargo movement is likely to rise and cause further delays and backlogs for industries , creating long and short-term ripples across supply chains and affecting business agility .
Supply chains will have to infuse more flexibility into logistical set-ups , creating alternative opportunities through potential near and far sourcing options , accommodating local and global disruptions .
The key is that the resilience activity is scalable and responsive , to be switched on and off as needed , not only from a supplier perspective , but also on a company level . Simulating your supply chain needs and focusing on the elements that are critical will allow for timely adjustment of business plans and supply chain actions when you need to pivot . CLA
Article source : Maersk . Note : article information accurate at time of publishing .
Maersk
Supply chains may need to be reconfigured around alternative supply points where supply is still viable .
COLD LINK AFRICA • May 2022 www . coldlinkafrica . co . za 15