If you get the impression that shortages have been in the news a lot lately, you’re right. They’ll continue to be, because developments are evolving very quickly; the situation is becoming more worrisome and everyone will be impacted.
To make matters worse, shortages are spreading. Groceries and other businesses are suffering from depleted inventories and empty shelves, and even national chains are limiting the quantity of certain items that consumers can purchase.
One would imagine that pharmacies would get preferential treatment to ensure they run smoothly, but they are not, and in New York City they are being affected as much as everyone else. The Daily Mail said, “(Their) Shelves are nearly empty because supplies are not getting through... Stores such as CVS, Walgreens and Duane Reade are all running very low on goods.”
The Daily Mail is referring not only to general goods. Major pharmacies are having difficulty filling prescriptions because they are short of staff, supplies, or both. According to the FDA, there is a shortage of at least 149 medicines - among them some that literally are lifesaving.
Don’t Worry, Be Happy
Mainstream media is reporting that these problems are only transitory and will be resolved soon, but there’s no evidence of this.
A veteran of the food business in Maine said, “The shortages are real. My supplier has limited the number of cases I can order.” This comment was made two months ago, and since then getting supplies has become even more challenging.
Unfortunately, shortages are not limited to one supplier, nor are they limited to Maine. All suppliers are experiencing these problems to at least some degree. As a result, popular items such as energy drinks, soft drinks, bottled water, and juices are becoming increasingly difficult to find, and “out of stock” notices often hang over the shelves where they used to be stacked.
In addition, there are shortages of meat and poultry, and even when orders are being filled, prices have risen so much that some consumers can no longer afford to buy them. Meat prices are rising faster than most other grocery items; poultry, fish and eggs are up 5.9% over last year, and overall are more than 15% higher than they were in 2019.
According to Bloomberg, meat reserves in the US have dropped to “dangerously low levels,” which suggests that high prices will linger. And supplies of poultry are even tighter; they are down 20%.
Because of worsening shortages, Costco and other retailers are limiting the purchase of some items including toilet paper, cleaning products, and bottled water.
“Could Last For Years”
US Transportation Secretary Pete Buttigieg acknowledged that “some supply problems could last for years.”
So why is there a supply crisis? Why will it take so long to fix? And how might it affect the average Joe and Jane? To answer these questions, it is necessary to consider this problem in its entirety.
A perfect storm has formed that is affecting supplies and prices, imports and exports, commodities, food production, and manufacturing. Dozens of cargo ships are waiting to unload many hundreds of thousands of containers in LA, NY, and other cities, and it will be weeks - if not months - until this traffic jam is cleared. Many millions of dollars of goods bound for America are being held in warehouses in China awaiting shipment.
At the same time, shipping has become incredibly expensive. The Washington Post reported the median cost of shipping a standard container from China to the U.S. West Coast hit a record $20,586. That’s nearly twice the price it was in July, which was twice the cost in January according to the Freightos Index.
At the same time, one of the worst energy crises ever is spreading around the world. There are rolling blackouts in China, India, and Germany, and companies are forced to close for at least a few hours a day in these and other countries. A dozen power companies in the UK have gone belly up, and there is a shortage of power even in some parts of the US. Some experts are warning that the outages and closures we are seeing in Europe and Asia could spread to the US.
And fuel prices are skyrocketing. Oil and natural gas have roughly doubled over the last year, while gasoline is up by around 50%. A barrel of crude in the US recently topped $80/barrel, the highest price in at least seven years, while gasoline has climbed to $3.30/gallon, also a multi-year high.
Stockpiles of heating oil in the US have fallen to 20-year lows. Because of growing demand for energy and lower supply, companies are turning to coal - a fuel that was all but banned just a year ago - to help meet demand, and now its price also is soaring; coal is up approximately 250% year to date. Natural gas is up more than 150% year to date.
Separately, there is a shortage of computer chips, and companies big and small are having difficulty hiring all the employees they need, further curtailing supplies. The Biden Administration, which has consistently been saying that conditions will be back to normal by year’s-end, now says they will not be.
If shortages and rising prices persist, they will certainly affect sales and profits, the inflation rate, interest rates, and ultimately stock prices. Unfortunately, most of us can’t do anything about those issues.
But in our own small ways we can roll with the punches by stockpiling essentials before prices go even higher or are unavailable at any price; pay down debt to the extent we can; and do some old-fashioned belt tightening.
Of course, in theory the supply and price problems could resolve very quickly. Then again, given all of the crazy things that have been happening in the world they may not, and who’s to say they won’t get even worse. The posuk (verse) in Mishlei (Proverbs) comes to mind: “Who knows what the day will bring?” These days, this question really hits home.
Sources: bloomberg.com; economiccollapseblog; endoftheworld.com; washingtopost.com; YouTube: Michael Invests: The World’s Power And Energy Crises Are Going To Crash Stocks