March 31, 2021 / Source: The Bizz USA
By Haarika Kalahasti; Edited by Adya Kumar
The Suez Canal is an artificial waterway in Egypt that connects the Mediterranean Sea to the Red Sea via the city of Suez and eliminates the need to circumnavigate Africa to get to Europe to Asia. With the passage, many across the globe can save precious time delivering goods quickly. Instead of spending days or weeks traveling from Europe to Asia, one can spend a matter of 13-15 hours through the Suez Canal to get there. The canal was officially built-in 1896, costing roughly $100 Million and billions later with renovations. It is meant to hold a large container ship of 400 meters, and ships need to obtain permission if they are larger.
Recently, the canal was hit with a bad situation: A ship got stuck! The Ever Given, one of the world’s largest container ships, at nearly 200 feet wide and 1,300 feet long, blocked the Suez Canal at 7:40 AM on Tuesday, March 23rd, causing a major maritime “traffic jam”.
As shown in the image, the ship was practically diagonal, having no place to move whatsoever. Some have attributed this to high winds and sandstorms (which are common in Egypt during this time of the year), while others say the ship went adrift because of possible power failure. Regardless, this was the first time a ship has gotten stuck in its 150-year history, shocking the news everywhere. The actual cause of this situation-- whether it be nature, technical error, or human error-- is unknown, but we must consider the impact this one event can have on the entire world and us, consumers.
The immediate impact, of course, is the blocking of many other ships and vessels. Every day, over 50 large ships utilize the Suez Canal passage. With the Ever Given blocking the route, hundreds of ships have been held up thus far and likely more in counting. If they had already entered the canal, the more time they must wait for the Ever Given to clear the space.
This issue unfortunately leads to a major economic one as well. According to ABC News, “Shipping industry journal Lloyd's List estimated that the blockage is impeding approximately $9.6 billion per day worth of goods in container cargo alone. As containerized cargo accounts for just 26% of total traffic through the canal, the outlet estimates that the actual total value of goods being held up is likely much higher.” 90% of global trade is transported by sea, with just over 12% of our global trade passing through the Suez Canal. This means the blockage will delay the shipping of goods and global supply chains, such as European cotton from India for clothes, petroleum from the Middle East for plastics, and more. With many ships accumulating, many are frightened to see what the economic impact could be, as well as the impact it could have on consumers.
Because of the delay in virtually everything, consumers, like YOU, may see delays in shipping and the rise in gas prices. Because a large load of oil is stuck in the passage, we will be facing higher gas prices. We all hate paying more for gas, but it is inevitable at this point.
As of Monday morning, it has been announced that the Ever Given is now up and running and floating again. After six stressful days for the salvage team working on land and water, the ship was set free. “The army of machine operators, engineers, tugboat captains, and other salvage operators knew they were in a race against time. Each day of blockage put global supply chains another day closer to a full-blown crisis.”, according to the New York Times. With their hard work, we were able to prevent a major unforeseeable economic crisis from occurring and destroying many aspects of our globally-tied economy. Even though shipping is delayed and oil prices may be higher at the moment, just know that they will return to normal with Ever Given up and running again.
This one event, although it might not seem major, surely has given a glimpse at what the implications of overly relying on global networks can do to the economy. However, it is up to one to decide if reliance on global supply chains is a good idea. What do you think?