Russian President Vladimir Putin’s unprovoked invasion of Ukraine has prompted the United States, European Union and other countries to impose sanctions on Russian energy that are accelerating the rise in gasoline prices in the world. But the spike isn’t just affecting consumers at the pump, with gasoline prices at all-time highs in countries around the world. Soaring oil and gas prices will ripple through supply chains for just about everything that needs to be transported around the world using fossil fuels, according to Nada SanderUniversity Professor Emeritus of Supply Chain Management at Northeastern.
Take bananas, for example. For consumers in North America and Europe, the fruit has a long trip from plant to table as it can only be grown in tropical environments, such as those found in Central or South America. “A banana has a very long footprint in the supply chain,” says Sanders. The banana is a heat-sensitive fruit that crosses three stages of development: The pre-climacteric stage, or “green life”; the climacteric or ripening stage; and the stage of maturity and senescence. This process is controlled using artificial ripening to ensure that the highly perishable fruits can reach their far-flung destinations within a specified time.
As a result, the banana supply chain is one of the most resource-intensive journeys compared to other food products, and involves refrigeration, ripening centers and various modes of transportation and distribution, Sanders says. “Think of anything that uses energy of any kind,” she says. “Let the truck move it; whether it’s the [mechanized] tools that harvest it. Anything you physically move, put on a barge or truck…the more steps, the more it will increase the shipping cost and therefore the price of that item. ”
Ecuador is by far the world’s largest producer of bananas, accounting for around 18.4% of global exports in 2020, according to World Trade Magazine. countries such as Guatemala and Costa Rica also produce a significant amount of bananas. The banana’s journey begins at a plantation, where it is harvested when ripe. For long-distance transport, bananas must be kept in the “green life” stage by refrigeration so that they can be artificially ripened later. Harvests are washed, labelled, and then packed in local processing plants. Then they are transported by distributors on trucks and, eventually, on bulk freight, where they will remain in refrigerated containers for several weeks during sea transit.
When the bananas are close to their final destination, they are stored in forced ripening centers at temperatures between 13 and 18 degrees Celsius for up to a week before being transported again by truck, this time to retailers who will resell them. Trucks, freight and refrigeration all consume significant amounts of energy, whether oil or electricity. Every link in the supply chain is vulnerable, Sanders says, amid the ongoing geopolitical chaos in Eastern Europe.
But it’s unclear exactly how the gas price hike would impact what a consumer might pay for something like a banana, as retailers hold down the price of the fruit. relatively low. Indeed, rising production costs are often passed on to smallholder farmers, banana plantation workers and the land itself, according to a 2018 report of the non-profit organization Fairtrade International. This put more tension on more conventional small producers, who often bear the brunt of supply chain disruptions, rather than the end consumer, Sanders says.
Also, because the banana has such a short shelf life, grocers may be reluctant to adjust prices. “You can’t really raise that price if you have to sell it in a very short time,” says Sanders. “You have a very short period where there is some value and then it can drop to zero. It could even be a liability, especially if you have to move it, ship it somewhere or throw it away. If that’s the case , then you will have to lower this price as much as possible.”
The price of food in general had risen before Russia invaded Ukraine. The price of food around the world has increased 20%, compared to last year. This trend is expected to continue, Sanders says. “I hate to say it, but I think things are only going to get worse for a while,” Sanders says.
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