The Disruption Report #3: Rising Oil Prices, Supply Chain Disruptions and Semi-Conductor Chip Shortages

Rising Oil Prices

Oil prices are now at their highest level in a year. As we know only too well, the resin used to make plastic toys is derived from oil. Most toy companies have already locked in their pricing for 2021, so it should not impact the toy industry this year. Next year, however, is another story so we need to keep a close eye on oil and other raw material costs.

Is More Pressure On the Way for the Supply Chain?

There is a quote in a recent Bloomberg Markets article that is worth noting. Author Sybilla Gross writes in her article, “A New Commodities Boom Beckons When Pent-Up Demand Unleashed” the following“:

The eventual end of the coronavirus pandemic is likely to herald a consumption boom, piling pressure on precarious supply chains and boosting raw material prices, according to the Merchant Commodity Fund.

The good news is that we can expect a surge in demand. The bad news, however, is that the good news could disrupt our hopes for an easing on the supply chain. Increased demand is not so good for inflation either.

The Semi-Conductor Chip Shortage is Escalating

As I have reported in earlier articles, there is a major chip shortage taking place. It initially impacted and continues to impact the automobile industry. Here is how CNBC writer Kif Leswing describes the cause in his article, “Why there’s a chip shortage that’s hurting everything from the PlayStation 5 to the Chevy Malibu.” He tells us that it’s because of Covid-19. When Covid hit, “…people [began] buying PCs, monitors and other gear for working or going to school remotely. Then, last fall, home entertainment gadgets like game consoles, TVs, smartphones, and tablets started flying off the shelves.”

Sony is claiming that the shortage is why they failed to meet demand for their PlayStation 5. I have also heard from some toy companies that they are having difficulty securing production for some chip-based toys. Unfortunately, chips are yet is another shortage for us to monitor.

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