Blog Post #5 - POLS170 LoBue, Gaby
Blog Post #5 - POLS170 LoBue, Gaby
How Globalization is Negatively Affected the Global Supply Chain of Oil During the Russia-Ukraine Crisis
Globalization has brought the world closer together through the flow of information, goods, and services around the world. In an idealistic world, these flows would remain uninterrupted by the chaos caused by human conflict, natural disasters, etc. Unfortunately, this is not the reality, and the world is often met with the consequences of detrimental world events. Russia and Ukraine’s hold on the major industries like oil and wheat are causing major shortages and disruptions for people around the world, triggering huge price increases. This is because many countries and corporations have used globalization to their advantage to make an extremely complex and interconnected supply chain network, making any uncertainty in supply/demand spark panic, even if the countries aren’t directly connected in any way.
According to the United Nations, Russia and Ukraine supply 25% of the world’s wheat, 60% of sunflower oil, and 30% of barley imports globally. Russia is also largely responsible for the world’s fertilizer and oil exports. This ultimately has made prices for these goods skyrocket since Russia and Ukraine are trying to hold their inventory on these goods during these times of war. This defensive strategy from Russia and Ukraine has made other countries halt their exports on important goods as well, which shows how world events tend to affect the nature of other countries.
Oil prices in the United States have reached an all time high in the past few months due to Biden’s ban on Russian imports as well as our recent emergence from the pandemic. Because of this series of events, it seems safe to assume that Russia is a big exporter of oil for the United States, right? Interestingly enough, the United States doesn’t import much oil from Russia to make any major impact in our supply chain, as the US is actually a top oil producer in the world. So the question remains: why are US oil prices so high?
This directly correlates to the topic of globalization in the global supply chain. The world runs on a global market, meaning that so many of our everyday products are being sourced through intermediaries from many different countries before it arrives in stores. This means that supply and demand on a global level is agitated by events happening in countries, since a lot of the time these countries are a part of the supply chain of the product in some way. Just because the US is a big oil producer, it doesn’t mean that we are completely energy independent. Any potential or current bottleneck in the flow of oil scares fracking companies, countries, and well as consumers. Investors may take back investments, which leads to companies needing to increase prices to keep their operations afloat. Consumers may see this threat and try to stock up on gas, driving up demand while supply remains the same. Reactive strategies to global crises shows how interconnected we have become on an operational level, making almost every country dependent on each other. This shows one of the harsh disadvantages that globalization has brought about.
https://www2.deloitte.com/us/en/insights/focus/supply-chain/supply-chain-war-russia-ukraine.html
https://www.nytimes.com/2022/04/30/business/economy/global-food-prices-ukraine.html
https://www.youtube.com/watch?v=C-VjqMZRCTg
this was a great blog about an issue that will be affecting us for a really long time. it's crazy to think how interdependent we all are on each other. it's instances like this where that feels like a bad thing. do you think it is possible to become more self-contained and would that be a better thing? of course we'll always have to rely on others for some things but the less the better. even then, you mention how even if we don't have trade ties with a nation their actions can mess with the supply change which in turn affects us... so what's the point.
ReplyDeleteI really enjoyed reading this blog post, and I appreciate that you chose to talk about such a relevant topic. What I specifically liked about this post was that you chose to disprove a theory that many of us likely would have thought different. It almost seems that this blog gives a more critical look at globalization, and questions if it is truly for the best in all cases. I would be interested to learn about your take on globalization as a whole, but otherwise this was a fantastic blog post.
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