How are volatile oil prices affecting the Israeli supply chain?

Between the already tumultuous situation brought on by COVID and the war in Ukraine, Israel’s supply chain is on the ropes.

An oil tanker docks in the Mediterranean Sea near the oil port of Europe Asia Pipeline Company (EAPC), as seen from Ashkelon, Israel, June 10, 2021. (photo credit: REUTERS/AMIR COHEN)
An oil tanker docks in the Mediterranean Sea near the oil port of Europe Asia Pipeline Company (EAPC), as seen from Ashkelon, Israel, June 10, 2021.
(photo credit: REUTERS/AMIR COHEN)

As the price of oil fluctuates rapidly amid geopolitical tension in Eastern Europe, the already unstable Israeli supply chain could stand to take yet another blow.

Tiran Rothman, who holds a PhD in economics and is the CEO of the consulting and research firm Frost & Sullivan Israel, one branch of a vast international firm with more than 40 offices stationed around the world, offered insight on how the economy could be affected by the current fluctuation in oil price.

Besides causing heart attacks at the gas station, how is the current volatility in the price of oil going to affect the economy?

“There is going to be an impact on the Israeli market, specifically on imports of goods and services. About 99% of the transportation of goods to Israel is maritime transportation, and the price of oil will influence that cost. Also keep in mind that the cost of manufacturing is based on the energy – the oil and gas – put into manufacturing. So the manufacturers’ costs are increasing, and they transfer that cost to the end clients.”

What other factors serve to exacerbate that pricier shipping and production?

 Dr. Tiran Rothman. (credit:  EYAL TOAG) Dr. Tiran Rothman. (credit: EYAL TOAG)

“We already had supply chain issues, not just because of the Ukraine-Russia war, but because of the pandemic. It’s like the perfect storm... you have the previous problems caused by COVID, and also the current problems with supply – added to that is the surge in the price of oil. The combination of these factors is going to significantly increase the prices of goods and services to Israel.”

What’s the kind of time frame that we’re looking at when we talk about these factors impacting the end consumer? What kind of price increases can we expect?

“It depends on all kinds of parameters; generally, the impact is not going to be counted in days, but it will be counted in weeks. How much will prices increase? We don’t really know, but you can see the situation impacting the current inflation in Israel, which is what sets the cost of the bread and milk and cornflakes that we buy every day.”

Is there a potential positive outlook on this situation?

“Well, eventually, this is a great opportunity for Israel to become a significant player in the European goods market: Israel is in a great position to export the gas we found in the sea. What Europe is trying to find right now is an alternative for the Russian gas pipelines, so what they’re trying to do is trying to import gas from Israel, maybe from Egypt, maybe from Lebanon - basically, the Middle East could become the next big player for gasoline to Europe.”