Recent spikes in food and gas prices have caught the attention of consumers, as well as analysts – who warn that the pain of rising prices will hit the most vulnerable populations hardest.
There are many reasons for these increases, but they can usually be attributed to one or more consequences of the pandemic: bottlenecks in the global supply chain are one of the culprits. The United Nations Conference on Trade and Development found that global shipping fell last year, the first drop since 2009. “The near-term outlook for maritime trade is bleak. Predicting the long-term impact of the pandemic as well as the timing and scale of the industry’s recovery is fraught with pitfalls, ”the organization warned.
Production barriers linked to the pandemic are also contributing to rising food and fuel prices. Agricultural production is dependent on weather conditions, and climate change has contributed to more extreme storms and climate changes that impact planting times and crop yields. Food production in the United States also relies on an army of highly mobile workers, whose low wages and overcrowded working conditions make them particularly vulnerable to Covid-19 – a combination of circumstances that have limited production and increased costs for food producers, said Phil Lempert, founder of SupermarketGuru.com. The combination of production bottlenecks and spikes in demand has resulted in higher prices, especially for meat, he said.
Consumer Price Index data for the month of January showed that the cost of food consumed in the home was up 3.7% from a year ago, more than double the 1.4% year-over-year increase in the prices of all goods included in the CPI.
“Food prices are going to continue to rise for probably a good year, a year and a half.”
Lempert warned buyers shouldn’t expect relief anytime soon. “I think food prices are going to keep going up for probably a good year, a year and a half,” he predicted. “Our costs will go up for food production,” he said.
Rising oil and gasoline prices are another factor contributing to the escalation in food prices. Demand for gasoline has rebounded faster than oil producers could ramp up production, pushing prices up, even though millions of people still do not take business trips or travel to the United States. job.
US oil production had increased before the pandemic. OPEC and its allies had tried – mostly unsuccessfully – to disrupt this trajectory by increasing production and lowering prices, but Covid-19 dealt the blow to the US oil sector that OPEC did. failed to disembark. The price of oil plunged last year as countries closed, with the prices of some futures even turning negative at one point.
“Covid has decimated demand. This caused a lot of contractions and cutbacks in production, ”said Patrick DeHaan, head of petroleum analysis at GasBuddy.com. “2020 has delayed US oil production by several years.” Today, the number of active oil rigs in the United States is about 50% lower than its number before the pandemic, he said.
In the past two weeks alone, the national average price of gasoline has jumped about 18 cents, according to data from GasBuddy. Part of that recent rise was a short-term spike from the deep frost that led to production shutdowns across Texas, but DeHaan says even thaw temperatures won’t dampen the price hike. “There has been this imbalance between supply and demand, as Covid business has slowed down, more businesses have reopened, and Americans are filling up more often,” he said.
Supporters warn that rising food and gas prices will have a disproportionate effect on those least able to afford them. A new study has found that the $ 900 billion stimulus package passed by Congress last December lifted 1.6 million people out of poverty. It has nothing to do with the 8 million people who fell into poverty between June and December of last year.
Poorest U.S. families already spend more than a third of their income on food: US Department of Agriculture data shows households in the bottom income quintile spent 36% of their income on food in 2019.
“If you think about food prices over the past year, they have increased dramatically,” said Geri Henchy, director of nutrition policy at the Food Research & Action Center. “The impact for low-income people is that they have limited budgets, which makes it even more difficult to buy enough food, and it makes it even more difficult to buy healthy food. It’s a disaster, ”she said.
Not only are consumers paying more to fill their shopping carts, but rising food prices are affecting food aid organizations that buy everything from canned vegetables to peanut butter for distribution. The rapidity of the price increases means that nutritional assistance and government food programs have not had the opportunity to adjust their models to reflect what recipients receive from the aid.
And while national supermarket chains and big box stores have largely been able to mitigate the worst supply chain disruptions that occurred at the start of the pandemic, small grocers and convenience stores who are the only source of food in many low income areas don I do not have these kinds of resources. These retailers have no choice but to pass the higher distribution and delivery costs on to their customers, Henchy said.
“If you think of the underfunded, low-income communities that depend on small stores, those prices just go up from there,” she said. “The costs are always passed on because these small stores don’t have economies of scale.”