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Diesel bowser

What’s the next shortage after Adblue

By John Coyne

For the foreseeable future, Australians are set to experience unexpected increases in prices and decreased availability for many everyday consumer goods. While COVID-19 is partly to blame, some of this is our own fault. Three decades of undying faith in globalisation – and the cheaper prices delivered by offshoring – has left our supply chains vulnerable to disruption.

The latest shortage to hit the headlines has involved a little-known diesel fuel additive known as AdBlue which is added to the fuel used by modern diesel engines to reduce exhaust pollution.

So, what’s the problem? In short, Australia is set to face an AdBlue shortage by February 2022, if not earlier. And due to offshoring, we produce very little of AdBlue’s key ingredient – urea – domestically. We’ve done little of late to support local production that otherwise would struggle to compete in the global market. Already, the emerging shortage has resulted in a 10 cent per litre increase in our diesel price.

The shortage will impact our air quality and agricultural and transport industries. This means reduced availability of goods and increased costs from the petrol pump to the supermarket for the average Australian.

So, why is this happening? Well, more than 80 per cent of the world’s urea supply is manufactured in China. The international price of urea has skyrocketed of late. In response, the Chinese Communist Party has diverted its urea exports to keep domestic costs of the fertiliser low. They’ve also diverted their AdBlue production towards the local market to reduce pollution levels in advance of the Beijing Olympics.

The Australian government is racing to reach agreements with international suppliers to resolve the problem.

However, the AdBlue shortage is a symptom of a broader issue that requires bigger thinking. Finding a solution for our increasingly vulnerable supply chains and reduced domestic manufacturing capability is complex. The government has a big part to play in ensuring our national resilience. However, to do so, they’ll need to work much closer with the private sector than ever before.

For more than 30 years, we’ve relied on markets to fix these problems, so the public service doesn’t have the experience or knowledge to lead this. Now they will need to work with industry to identify those goods that are impacted by market monopolies, controlled by countries with a history of, or potential for, economic coercion. They will also need to focus on goods whose supply chains are vulnerable to sudden disruption.

So, looking ahead, what are the next product shortages that will affect average Australians? Well, there is an ongoing global shortage of aluminum. This is already impacting the cost and availability of everything from beer cans to new vehicles.

Then, of course, there’s the global dearth of semiconductors and computer chips. That’s impacting the availability and price of everything from gaming consoles to kitchen appliances.

The biggest problem at present though is the growing shortage of shipping containers due to COVID-19 and stressed supply chains. This means that even those goods that can still be manufactured can’t be brought to market due to the China COVID-19 shutdown and the US slowdown. Already the price of shipping is skyrocketing.

The clock is ticking, and while the government is rapidly trying to address the imminent scarcity of AdBlue, they’re yet to address the elephant in the room. How can the government build an economy that’s more resilient to the shortcomings of globalisation?

Originally published by: Sydney Morning Herald on 16 Dec 2021