South Africa: Why Freight Costs and Not Oil Are to Blame for the Spike in Global Inflation

opinion

Dr Roelof Botha is economic adviser to the Optimum Investment Group.

Ever since global inflation started heading north at an alarming rate, much of the conventional wisdom surrounding the causes of this most unfortunate trend has revolved around energy prices, especially gas, oil and petroleum.

When analysing the composition of the basket of goods and services that form the basis for the calculation of the consumer price indices in South Africa and most of its key trading partners, these prices certainly stand out, as do some food prices.

However, when comparing the current upward phase of the commodity price cycle during the first six months of the year, with the previous surge in prices that was recorded between 2011 and 2013, it becomes clear that oil is not the culprit.

Rather, it is the cost of shipping oil, petroleum and all other traded goods from one port to another. Oil from Saudi Arabia has to travel almost 10,000km before it reaches the port of Cape Town.

Vital role of sea freight

Logistics data tracked by the United Nations Conference on Trade and Development estimates that the sea carries more than 80% of the world's traded goods by volume and 70%...

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