Why Labor Bottlenecks Will Worsen the US Oil Crisis

Posted: October 13, 2021

The ongoing oil crisis in the US has caused many people to ask why gasoline prices have skyrocketed to record highs despite the fact that the supply of oil available to the market has increased in recent weeks. The simple answer is that a great deal of oil has been shipped from overseas and stockpiled in US ports, but the bottleneck getting the oil from those ports onto land has caused prices to rise anyway as labor bottlenecks transform into supply bottlenecks.

Port Congestion in Southern California

The US has imported roughly 3.8 million barrels a day for the past 4 weeks, and lots of that oil is still out at sea, making it harder for America to absorb much-needed foreign oil so quickly. But perhaps most concerning is what will happen when those ships finally reach dock: labor shortages in Southern California mean that unloading these vessels will take much longer than it normally would, meaning supply bottlenecks could soon rival labor ones. Early this morning, the White House has brokered a deal for the port of LA to allow it to become a 24/7 operation. Major companies like Walmart, Fed-Ex, and UPS have been asked to offload their vessels during non-peak hours in order to give other materials a chance to get to shore. All of these delays add up and force supply shortages of many goods way down the line.

Sattelite image courtesy of the Washington Post

Growing Consumption of Everything

The problem is that all those ships are stuck waiting at anchor because not enough dockworkers are available to unload them. Employment has remained relatively steady or slightly decreased through 2020, so it is not the root cause of the issue. Many hundreds of dockworkers have been trained through 2021 to support the sheer magnitude of goods finding their way to ports. Company’s like DICK’S sporting goods have seen some of their biggest sales numbers of all time as people navigated COVID. Stimulus checks definitely stimulated the economy, but far too fast. This is why your favorite websites or goods are notifying you that demand is outpacing supply and you may not receive your goods for months. The supply of labor has remained relatively stable, but the volume of goods demanded has skyrocketed.

Pipeline Fiasco

With more and more ships piling up on the coast, it is only expected that some problems occur. Through investigation, it has been determined that the recent oil spill on Huntington Beach may have been a result of an anchor being dropped at an inappropriate location. The anchor ended up catching the pipeline and dragging it causing the damage that led to an oil leak. The anchor hooked the pipeline and pulled it much like a bowstring displacing one point on the line by 105 ft. Even though ships are supposed to avoid dropping anchors in specific locations, it may have happened anyway. Investigators will be boarding vessels in the coming weeks to determine which of the ships may have been at fault.

Fueling Inflation

As more officials recognize that this inflation is not transitory, fears of increased prices continue to mount. Consumer prices are already up 5.4% year over year and many are concerned the inflation rates will continue to balloon through 2022. Supply and demand are slowly rebalancing across many sectors. Used vehicle prices fell for the second straight month, but this still leaves them up 24.4% on the year.

Monthly 12-month inflation rate in the United States from August 2020 to August 2021 (statista.com)

The sooner we figure out how to supply the labor to sort through this period of high demand, the sooner our wallets gain a little more room to breathe.






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Related Tags: Bottlenecks | demand | imports | labor | ports | supply

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