#BTEditorial – Rising gas prices just the tip of iceberg

The complaints of Barbadians about the increased price of petroleum products may well be a foreshadowing of what is expected to unfold in the latter half of this year.

Just as social distancing, the wearing of face coverings, and virtual meetings have become common features of life since the COVID-19 pandemic enveloped our lives, rising inflation has also become endemic as a result of the global health crisis.

When Prime Minister Mia Mottley eliminated the road tax imposition paid annually by vehicle owners, and replaced it with a tax on fuel, the move was a welcome relief for many vehicle owners who preferred an incremental payment rather than a lump sum of between $400 and $1600 to be paid on a specified date.

Gas prices on the international market were still relatively low at the time she made the announcement in her first Budgetary proposal. Today, however, Barbadians are purchasing fuel and other petroleum products at some of the highest price points in years.

Howls of disapproval are growing. And like most commodities on the world market, oil prices are rising. Given Government’s dependency on this tax to raise revenue, it is very possible gasoline in Barbados could jump above the record $4 per litre mark.

As we have indicated, petroleum prices are but a part of troubles likely to face Barbadians. The COVID-19 pandemic’s tentacles are as active as they were when the viral illness began its global and deadly spread.

Yes, we have made great progress with vaccines, treatment methods, the creation of protocols to reduce transmission, and if the Chinese government allows international investigators the freedom to probe, we may even discover how the coronavirus emerged.

The problem for us as consumers rests with access to everyday products and the pandemonium that has erupted in global supply chains.

Having scaled back production, laid off workers, and in some cases, sold some capital assets, following dramatic declines in demand for many products during the height of the pandemic, manufacturers and producers are now in a mad rush to respond and return to regular orders from wholesalers.

Just as the Chinese were at the centre of the emergence of the coronavirus, they are also a central player in the disruption of supplies and the increase in prices for most products.

As the Christmas shopping period draws closer, tourism dependent countries like ours are going to be ramping up requests for consumer goods and foods. More visitors are expected to be on island, and they have to be serviced. But our friends in China are finding it difficult to adequately respond to increased global demand.

The result is expected to be high prices for almost everything. With virtually every item we use arriving on a cargo ship from overseas, Barbadians can reasonably expect to be hit in their purses. And this will come at a time when unemployment is still extremely high, and most businesses are far from reaching capacity.

The COVID-19 outbreak in southern China has clogged ports critical to global trade, causing a shipping backlog that could take months to clear and lead to shortages during the year-end holiday shopping season, the major media houses are reporting.

Even though China has officially brought the pandemic there under control, there are still small outbreaks, one of which caused a shutdown in the Chinese province of Guangdong, which is home to some of the world’s busiest container ports.

Peter Sand, chief shipping analyst for Bimco, an association of shipowners said in a report this week that the issues in China were “adding extra disruption on an already stressed-out global supply chain” and so consumers “may not find all they were looking for on the shelves when shopping for Christmas”.

With our lack of economies of scale, the needs of small markets like ours are not likely to receive any concessions and will feel the full impact of rising shipping costs and product prices.

Maersk, the world’s largest container shipping line and vessel operator has alerted its clients that ships could be delayed in Southern China for more than two weeks.

Shipping giants Hapag-Lloyd, MSC, and Cosco Shipping, have all increased their freight rates for cargo between Asia and North America or Europe. MSC, for example, disclosed that it would increase shipping fees from Asia to North America by as much as US$3,798 for a 45-foot container.

The biggest price jump was reported along the route from Shanghai to Rotterdam in the Netherlands, where shipping costs skyrocketed by 534 per cent from a year ago to more than US $11,000 for a 40-foot container.

Average container freight rates from China to Europe, recently hit US $11,352, the highest level since at least 2017.

While the Mottley administration has taken much of the heat for its role in the high petrol prices here, it may be able to shield itself from harsh criticism come Christmas time, when the already limited spending power of Barbadians will be further constricted.