Middle East conflict sparks supply chain crisis threatening Australia’s food, medicine and cost of living
As oil prices continue to rise across Australia, another, less visible crisis is taking shape.
Escalating conflict in the Middle East is disrupting global supply chains; It threatens to hit supermarkets, pharmacies and the wider economy harder than many realize.
With the strategic Strait of Hormuz effectively blockaded, experts warn the fallout will extend far beyond the cost of fuel.
supermarket shock
Farmers are already feeling the pressure.
Fertilizer costs have doubled, diesel shortages threaten key planting and harvest seasons, and consumers could face significant price increases on daily essentials for at least the next year.
Michael Hampson, chief executive of dairy farmers’ cooperative Norco, offered a clear assessment of the looming food security threat.
Mr Hampson told The Guardian: “If the problem is not addressed immediately, as it is in the next week or two, the effects of this event will make Covid look like a tea party.”
“We won’t worry about running out of toilet paper, we’ll worry about not having food.”
While milk shortages may not be immediate, Mr Hampson said consumers should expect price increases of between 30 and 50 cents per litre.
Even packaging is under pressure. Milk bottles are made from fossil fuel resins; This means disruptions in the supply chain can leave farmers with milk but no place to put it.
“Then it doesn’t matter how much it costs because we won’t have anything to put the milk in,” Mr. Hampson said.
The fresh produce and grain industries face similar threats. Transport costs from packing sheds to supermarkets have already doubled.
“Unfortunately our costs will increase with each box; we need to be able to pass this on,” Fruit Growers Victoria’s Michael Crisera told The Guardian.
Meanwhile, Australian Standard White wheat prices rose to a 20-month high of $259 per metric tonne as anxious farmers hoarded diesel to keep seeders running.
Vital medicines are at risk
Australia’s healthcare system is also feeling the impact. The deterioration of shipping corridors is forcing pharmaceutical companies to switch from sea transportation to costly air transportation.
The country imports about 90 percent of its medicines, and about 400 medicines are currently in short supply, including 37 that are considered critical.
Petroleum-derived inputs required for the production of common medicines such as paracetamol and ibuprofen are also under pressure.
Despite the increased risks, Royal Australian College of General Practitioners (RACGP) president Dr. Michael Wright called for calm.
“If we have a problem people shouldn’t panic because in most cases there will be an alternative,” he told nine.com.au.
Dr Wright added that the crisis had exposed Australia’s over-reliance on imports.
“One of the things we could probably do more of is we could produce more drugs locally, and that might be a way to get around some of our addictions,” he said.
Inflation fluctuations
The economic fallout is expected to be significant. Finance Minister Jim Chalmers warned that the fiscal impact could rival both the Global Financial Crisis and the COVID-19 pandemic, saying it was a “defining impact” on the May budget.
Annual inflation, which recently dropped to 3.7 percent, is expected to rise.
Westpac modeling suggests headline inflation could peak at 5.5 per cent by mid-2026 if the disruption lasts three months.
The Central Bank has already responded with a 0.25 percent interest rate increase.
Small and medium-sized businesses are caught in the crossfire. With the end of government energy rebates, businesses face rising operational costs, rising borrowing rates and rising wages.
fuel crisis
All of these chain crises have their roots in a sharp energy shock that choked global shipping.
Gasoline prices are climbing to $3-4 per litre, but long-term modeling paints a bleaker picture; It could take three years for oil to reach US$120 per barrel and return to pre-war levels.
Even as drivers adapt to the pain in the vehicle, the wider costs of expensive fuel in farming, manufacturing and transport mean Australians may continue to foot the bill for this conflict at the supermarket and pharmacy for years to come.
