Running Out of Road: Global Transport Systems Supply Chains on Brink of ‘Collapse’, Warns Industry Body

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Published by Anonymous (not verified) on Fri, 20/05/2022 - 8:24pm in

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Transport

The warning comes as diesel prices have shot up – leading to dramatic losses in profits for transport operators, reports Nafeez Ahmed

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Rocketing energy prices have placed global road transport networks, and with them complex supply chains involving key goods and services, on the brink of “collapse” – according to the International Road Transport Union, which represents the entire road transportation industry worldwide.

The warning comes as diesel prices have shot up by 63% since last January, leading to dramatic losses in profits for transport operators that are jeopardising their business operations.

According to Radu Dinescu, president of the IRU, “road transport operators are facing a cash flow crunch, especially the 90% who are small and medium-sized firms".

"Volatility in diesel prices and inflexible commercial terms mean they have little room for manoeuvre and bankruptcies are climbing," he said. "This will damage road transport network capacity and efficiency, impacting supply chains, inflation and the broader economy. We need to act now.”

With escalating fuel prices driving inflation through the global economy, the IRU has said that the devastating impact on transport systems could lead to supply chain blockages as smaller operators risk going bankrupt. This would lead transport and logistics networks to breakdown. It would also increase the risk of operators having fewer funds available to continue investing in decarbonisation.

The Geneva-based IRU represents more than 3.5 million road transport companies operating mobility and logistics services worldwide. Earlier this month, its general assembly issued a 17-point resolution outlining measures that governments should take to avoid disaster.

The resolution calls on governments to release strategic oil and gas reserves; defer taxes and repayments for private loans and leases; eliminate energy taxes and excise duties for renewable components of fleets; establish rescue funds for road transport operators; diversify and upscale renewable energy production to decarbonise existing fleets; reduce the financial burden of decarbonisation on operators; invest in more collective passenger transport; and prioritise renewable energy subsidies for commercial road transport.

The consistent theme of the proposed measures is that, unless governments move rapidly to support existing logistics and supply chain infrastructure, it is at risk of disassembling.

The resolution specifically warns that the global road transport industry faces the prospect of bankruptcy if current energy price volatility continues.

“Shops and supply chains are announcing price increases and constraints on product availability due to supply chain issues stemming from a road transport industry struggling to meet growing demand and stay solvent,” says the IRU resolution.

The weak links in the chain, it adds, come particularly from “small and medium-sized firms” who are “forced to stop serving their clients and will not be able to make the necessary investments needed to comply with more pressure from decarbonisation policies”.

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What this suggests is that, while authorities have attempted to use half-baked market pricing mechanisms to push through decarbonisation, this approach isn’t working because the market remains fundamentally distorted in favour of carbon-intensive incumbent industries.

Trillion-dollar fossil fuel subsidies are still the order of the day, while limited measures such as congestion charging and other such laws tend to simply penalise drivers and citizens without providing appropriate financial support where needed to scale up key technologies.

If transport systems and supply chains begin to fail, this will have further knock-on effects on already astronomical price hikes for energy, food and other basic commodities.

Byline Times has previously reported that the financial sector is already in the midst of internal planning for outbreaks of civil unrest in Western homelands. The risk of social breakdown will be even higher if governments fail to address the mounting financial pressures facing road transport operators.

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