Macro Costs of COVID-19 / By: George Carvajal
To measure the costs of any financial crisis, it is important to find the counterfactual. The counterfactual in the case of a pandemic is considering how conditions would have been, had the pandemic not happened. Because we are currently still in a recession the losses are very hard to measure exactly (costs are still growing by the day). Many economists study prices and how they fluctuate. Prices will fluctuate to adjust to different market conditions. During the pandemic there has been a lot of fluctuation in prices, specifically, the price of gasoline has increased drastically affecting the price of goods everywhere. Pricing administrator at Newly Weds Foods, Alejandro Carvajal, reported that “[he saw] an increase in price in almost all raw ingredients used in our products.” Alejandro had said that this increase had a lot to do with disturbances to the supply chain. There is a lot of demand for these raw materials. Gasoline costs also affect these prices. Like Alejandro’s supply chain of breading ingredients, the cost of crude oil, another raw material, is also increasing. Ella Koeze and Clifford Krauss of the NY Times wrote, “The single biggest factor driving the spike [of gasoline] is the price of crude oil… the cost of the raw material accounted for 60 percent of the price of a gallon, comparing to 52 percent the same time a year ago (2021), and 25 percent in April 2020” (Koeze Krauss, 2022). If this trend continues we will continue to see increases in prices and most likely more losses as well. Not only do gas prices affect consumers domestically, but they also affect consumers on an international level. During the pandemic, there was a huge spike in the cost of shipping and transporting and there were many instances where ships were unable to transport their goods. Senior Economist for the International Monetary Fund blog, Yan Carrière-Swallow, writes, “The sea carries more than 80 percent of the world’s traded goods” ( Yan Carrière-Swallow , 2022). During the pandemic, “Truck drivers and ship crews couldn’t cross borders because of public health restrictions. Pent-up demand from huge stimulus programs during extended lockdowns overwhelmed the capacity of supply chains” ( Yan Carrière-Swallow , 2022). Alejandro Carvajal talked about how his company purchases peppercorns from overseas and there were labor issues on the supplier's end. Alejandro said, “ ship containers were not being sent in a timely manner and due to labor issues these containers were not being unloaded causing delays in supply.” Besides causing delays in getting goods to customers, the cost of getting them to their destination surged ( Yan Carrière-Swallow , 2022). This rise in demand and fall in supply causes inflation, making consumers' money less valuable and increasing the possible losses resulting from the pandemic.