Hoarding adds to economic damage triggered by Iran war

{"text":[[{"start":6.85,"text":"With the stand-off in the Strait of Hormuz in its third month, governments around the world are struggling with a shared dilemma: how to prevent hoarders worsening shortages of products from petrol to syringes."}],[{"start":21,"text":"In scenes reminiscent of pandemic-era panic buying, South Koreans rushed to buy plastic rubbish bags after the Iran war led to the closure of the strait, disrupting global supply chains. "}],[{"start":33.7,"text":"Australians cleared the shelves of jerry cans as drivers and farmers vied to stock up on fuel in rural areas. Social media posts on possible shortages of condoms went viral in China last month. "}],[{"start":45.6,"text":"Companies are hoarding too to secure vital supplies, exacerbating shortages and forcing governments to step in. "}],[{"start":52.75,"text":"South Korean police, for example, have launched a crackdown on firms suspected of hoarding syringes, as a shortage of naphtha threatens medical supplies. Meanwhile, in India, online influencers are driving a craze for ticketed Diet Coke parties, as limited supplies of the canned drink give it a new cachet."}],[{"start":70.3,"text":"“We value things more highly when they are limited — and people’s perceptions of scarcity can be exacerbated by social media,” said Elizabeth Costa, chief of innovation and partnerships at the UK-based Behavioural Insights Team, a consultancy that has studied ways to “nudge” people to prepare for crises ahead of time."}],[{"start":89.44999999999999,"text":"Yet while toilet roll shortages at the start of the coronavirus pandemic were an avoidable product of panic buying, global shortages of oil and other essentials now look all too real, which is giving households, companies and governments compelling reasons to stockpile before supplies dry up. "}],[{"start":105.44999999999999,"text":"The challenge for policymakers is how to minimise the economic pain caused by hoarding, while making sure that poorer households and countries can access essentials."}],[{"start":115.6,"text":"Economists understand the instinct for consumers to buy before prices rise. “I went to the petrol station to fill up my car — it’s perfectly natural,” said Mauro Pisu, a senior economist at the OECD, who has been tracking the measures governments are taking in response to the energy price shock driven by the Middle East conflict. "}],[{"start":null,"text":"

"}],[{"start":135.35,"text":"He and other economists argue that, as far as possible, governments should resist the urge to impose controls to prevent hoarding. They should instead allow market mechanisms, such as higher prices, to prompt people to change their behaviour and cut demand. "}],[{"start":150.95,"text":"“It will be important to let consumers behave as they think best and make sure that they face the right price,” Pisu said."}],[{"start":158.75,"text":"Many governments are doing the opposite. Among the more than 50 countries that the OECD is monitoring, the most common response has been to cut fuel duties or impose direct controls to keep prices down. That approach was storing up trouble, Pisu said. "}],[{"start":174.75,"text":"“If governments keep prices low to keep consumers happy in the short term . . . it’s clear this will make shortages more likely and acute,” he said. "}],[{"start":null,"text":""}],[{"start":183.65,"text":"Instead, governments’ first move should be to reassure people “that supplies are going to remain ample . . . you are still going to be able to get enough”, said Julian Jessop, former chief economist at the free market Institute of Economic Affairs think-tank. They should avoid any commitment on prices, he added, as often “prices going up would be part of the solution”."}],[{"start":203.95000000000002,"text":"Some governments have been trying to put this into practice. Australia last week announced a $10bn package to boost the country’s onshore fuel reserves, while Japan’s prime minister assured corporate hoarders of petrochemicals that the country would be able to secure enough naphtha-based products to last until the end of the year. "}],[{"start":222.3,"text":"Where shortages are real, though, market mechanisms will not be enough to stop poorer people being priced out of essentials or developing countries being outbid in a global rush to secure fertiliser or medical supplies. "}],[{"start":235.10000000000002,"text":"In India, factory workers who can no longer afford the soaring price of cooking gas and their city rents are returning to their home villages, where they receive free accommodation and government food handouts."}],[{"start":246.90000000000003,"text":"Costa argues that carefully pitched public messaging can help. She pointed to policy trials in Australia after the pandemic, which showed that appeals to people’s sense of community and morality led them to buy less. "}],[{"start":258.90000000000003,"text":"“There are opportunities to bring the public along with you,” she said. "}],[{"start":263.1,"text":"“Every little bit helps” is the tagline Australia is now using in a $20mn ad campaign urging drivers to empty their boot, pump up tyres and remove roof racks to use less fuel."}],[{"start":null,"text":""}],[{"start":275.65000000000003,"text":"Other governments are now adopting more forceful “nudge” policies to rein in demand, from subsidised public transport to quirkier interventions. "}],[{"start":284.3,"text":"Nepal’s state-run oil corporation has been selling cooking gas at regulated rates but in half-filled cylinders in an attempt to stretch scarce supplies. However, the policy is leading to shortages of the canisters themselves and reports of surreptitious, unsafe refilling practices. "}],[{"start":301.25,"text":"In the UK too, some think-tanks advocate a combination of price support and enforced behavioural change. The Institute for Public Policy Research has called for cuts in fuel duty twinned with lower speed limits to force drivers to be more efficient. "}],[{"start":315.2,"text":"If shortages become more widespread, calls for direct intervention — in the form of price controls or rationing — are likely to gain force. Saudi Aramco warned that the world’s stocks of petrol and jet fuel could reach “critically low levels” ahead of the summer months."}],[{"start":331.55,"text":"“A lot of this is way beyond market mechanisms,” said Yael Selfin, chief economist at KPMG, pointing to the pandemic-era hustle to secure national supplies of personal protective equipment (PPE) and of newly developed vaccines. "}],[{"start":348.6,"text":"Li Dong, a senior lecturer at Singapore’s Nanyang Technological University, who has studied ways to address pandemic hoarding of PPE, also argued for government controls on prices and purchases, but said his research showed that “you need to design them very carefully”. "}],[{"start":null,"text":""}],[{"start":364.95000000000005,"text":"A cap on retail prices could lead consumers to hoard more and companies to produce less, he said. Rationing, while it might seem fairer, also lessens the incentive for companies to boost capacity. A better approach can be to cap the ratio between wholesale and retail prices, tackling price gouging and hoarding while leaving incentives to increase supply. "}],[{"start":387.00000000000006,"text":"At the OECD, Pisu argued that income support, rather than price controls, remained the best way to help vulnerable households through a price shock. But he also acknowledged that rationing would have to become more widespread if the Strait of Hormuz remained closed."}],[{"start":401.6000000000001,"text":"But rather than seeking to constrain consumers, he argued, the real task for governments was to collaborate with each other to make the most of the strategic reserves they hold — rather than reaching for export bans he described as “natural, given political pressures, but short-sighted”. "}],[{"start":418.50000000000006,"text":"“Now is not the time to think about stockpiling,” he said. “It is the time to use the stockpile that should have been accumulated in good times.”"}],[{"start":426.90000000000003,"text":"Data visualisation by Amy Borrett"}],[{"start":437.1,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1778658926_6012.mp3"}