Supply chain bottlenecks and rising oil costs set to hit consumers

In an interview with the BBC, the Chief Executive of the giant Maersk shipping line, Vincent Clerc, said the higher cost of oil was increasing the cost of running ships, which would be passed on to customers. 

Given the danger to ships moving through the Straits of Hormuz – close to the coast of Iran – that sea route is now mostly closed to merchant ships. Similarly, the world’s biggest shipping lines are also avoiding passage through the Red Sea because of security threats. 

“It is causing widespread disruption to the global economy with firms such as Maersk sending its vessels on longer – and more expensive – voyages around the Cape of Good Hope,” the BBC reports. 

Quoting Clerc, the report says the extra costs work out at around US$200 for a standard-measure 20ft shipping container which can mean “anything from a 15% to a 20% increase on some of the freight cost”. 

Maersk’s container shipping arm plays a vital role in moving goods such as toys, clothing and electronics around the world. 

Not just shipping challenges 

Airlines are also raising costs for passengers and air freight, with the likes of Thai Airways saying prices will rise by around 10-15%. 

Food prices are on the rise, too. Apart from higher food transportation costs, the agricultural sector around the world expects a shortage of fertiliser, much of which is typically transported through the Strait of Hormuz. A shortage will, in turn, drive up fertiliser prices and force farmers to charge more. 

“More than one-third of globally traded fertilizer passes through the Strait of Hormuz, making it a critical artery for agricultural supply chains,” says business news broadcaster, CNBC.