There is no shortage of reasons for the turmoil in the global supply-chain

Major nerve centers of the world economy have been hit by a mix of covid and misfortune, especially in the latter part of this year. Transportation, energy and high-quality semiconductor chips are all facing major problems at the same time, for reasons that are distinct but widely related.

Start with transportation. While some Chinese ports are idle or operating at low capacity due to Covid, this is hardly the only issue. Strong trade in durable goods has affected the operations of containers, ships and ports around the world. The price of containers has skyrocketed, and it could be 10 times more than it was just two years ago. Much of global trade has slowed, some of which are no longer profitable.

In some cases, transportation-related services are being rationed because prices are being kept down – perhaps not to alienate loyal buyers, or perhaps because sellers aren’t sure the current demand shocks are permanent. Again, the net result is that a lot of trades are not happening on time.

Many suppliers require internationally traded components to complete the production and distribution of their goods and services. They are trapped now.

In addition, much of the port activity and associated local transport is labor intensive. Many parts of the world are facing labor shortages as people are not sure how to reconfigure their post-Covid work futures, or in some cases government benefits preventing them from working. can. This leads to further delays in the business network.

There may be a specific market reaction to producing more containers (increasing the number of ships or ports is difficult and slow). But this will require the same trade and transport networks that are currently poor.

As the whole process has progressed, inventories have shrunk, meaning the global economy is far less sluggish.

Then there are the energy problems of the world, which have deep roots. Many countries have sought to move to a greener energy supply, but there are not enough alternatives at first. Japan and Germany decided to abandon their previous nuclear energy commitments, and more recently China has seen power shortages.

Global energy networks were working fine a year ago, but as improvements have progressed the supply of natural gas is not enough to meet the new demand. Gas production and exploration were shut down in the early stages of the pandemic, and the recovery has been stronger and faster than the energy sector expected. In the UK, natural gas prices have risen 700% over the previous year, while Europe faces a wider risk of not having enough energy supplies for the coming winter.

Of course, energy is an important input for the production of many other goods and services. So this creates another set of ripple effects. And if networks for energy and international trade don’t function properly, many other parts of the economy will suffer.

Another problem area is high quality computer chips. The global economy was already heavily dependent on two countries—Taiwan and South Korea—for supplies. Then three things happened: chip factories closed during the Covid lockdown, a series of ominous natural disasters damaged chip supplies, and chip demand soared with increased consumer demand for durable goods like cars and appliances. At current margins, automobile production is severely constrained by available chip supply, which is one reason for new and used car prices. [in the West] stay so high

So, on one side of the equation are trade delays, input delays, high trade and transportation costs, very high energy prices and chip shortages. On the other side are American and European consumers, who saved huge amounts of money in 2020 and early 2021 and are spending it now.

This combination has fueled inflation. The demand in the market is increasing and the supply cannot keep up. And it is not just one problem that has an easy, straightforward solution, but a series of interlocking paths of economic chaos and delay.

These problems with global supply chains will eventually fix themselves, even though no one can say when. In the meantime, suppliers and distributors—as well as consumers—can probably take some little solace that they’re navigating through a complex mess that has (and hopefully persevered) no parallel in recent history.

Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution.