Recent price spikes for food and gas have caught the attention of consumers, as well as analysts — who warn that the pain of higher prices will hit the most vulnerable populations hardest of all.
The reasons behind the increases are myriad but generally can be traced back to one or more consequences of the pandemic: Logjams in the world’s supply chain are one culprit. The United Nations Conference on Trade and Development found that global shipping dropped last year, the first decrease since 2009. “The short-term outlook for maritime trade is grim. Predicting the pandemic’s longer-term impact as well as the timing and scale of the industry’s recovery is fraught with uncertainty,” the organization warned.
Pandemic-related production roadblocks also are contributing to rising prices for food and oil. Agricultural production is dependent on weather, and climate change has contributed to more extreme storms and changing weather patterns that impact planting timelines and crop yields. Food production in the U.S. also relies on a highly mobile army of laborers, whose low pay and crowded working conditions make them uniquely vulnerable to Covid-19 — a combination of circumstances that have crimped production and raised costs for food producers, said Phil Lempert, founder of SupermarketGuru.com. The combination of production bottlenecks and demand spikes have culminated in higher prices, especially for meat, he said.
Consumer Price Index data for the month of January found that the cost of food eaten at home rose 3.7 percent from a year ago — more than double the 1.4 percent year-over-year increase in the prices of all goods included in the C.P.I.
“Food prices are going to continue to increase for probably a good year, year and a half.”
Lempert warned that shoppers shouldn’t expect relief any time soon. “I think food prices are going to continue to increase for probably a good year, year and a half,” he predicted. “Our costs are going to go up for food production,” he said.
Another contributor to escalating food costs is the rising price of oil and gasoline. Demand for gasoline bounced back more quickly than oil producers could increase production, leading to an upward march for prices, even with millions of people still not taking business trips or commuting to work.
American oil production had been rising prior to the pandemic. OPEC and its allies had tried — mostly without success — to disrupt this trajectory by increasing output and driving down prices, but Covid-19 delivered the blow to the American petroleum sector that OPEC failed to land. The price of oil plunged last year as nations shut down, with prices for certain futures contracts even turning negative at one point.
“Covid decimated demand. It caused a lot of contraction and production cuts,” said Patrick DeHaan, head of petroleum analysis at GasBuddy.com. “2020 set things back for U.S. oil production by several years.” Today, the number of active…
Go to the news source: The price of food and gas is creeping higher — and will stay that way for a whil…