BY NEIL EISBERG
Resilience is generally understood to mean the ability to weather and overcome difficulties – the ability to bounce back, to recover and persist during challenges. And the world’s economic resilience is being challenged as it currently experiences major difficulties due to the conflict in the Middle East.
In this current context, resilience for many countries has become inextricably linked to energy security as oil and gas supplies have been disrupted and processing and storage facilities in the region have been threatened.
The impact on the world’s economies will vary – and it will take some time for the second and third order global economic consequences of the crisis to be understood.
While many looking at the economic impact of the conflict have focused on the most direct trade impact – the reduced flow of oil from the region – there are likely to be many other consequences down the line.
Beyond its use as fuel, the availability of energy (as oil or in the form of liquid natural gas, also a key export from the region) has an impact on downstream activities that rely not just on energy to generate heat for manufacturing processes, but also to provide the raw materials and feedstocks required in manufacturing.
Here the chemical sector is a prime example, as well as the associated sectors like pharmaceuticals, which also rely on specialised chemicals produced ultimately from oil and gas feedstocks.
The picture has been further complicated by the trends of globalisation and the off-shoring of manufacturing to lower cost economies. Here the underlying idea has always been that global supply chains could be cheaper and more efficient than building everything in one region or country.
The result has been that international trade has replaced individual markets serving local needs being based on locally manufactured products.
This means the shocks to supply chains are harder to understand and lead to unexpected consequences. The potential threat to the supply of US generic drugs from India is just one example of this complicated interaction, matched by possible shortages of basic ingredients from China for the production of these Indian products if the conflict continues (see Global supply disruption from Middle East crisis).
The drive to combat climate change has encouraged the development of alternative energy sources, such as solar, wind, hydroelectric and nuclear, but while these alternative sources have rapidly taken over from fossil-fuel based energy, there is still a major gap, not just from the need to support the intermittent nature of wind and solar, but also the burgeoning demand for electricity from electric vehicles and data centres.
The war in the Middle East is putting a new emphasis on energy resilience front of mind for many. For some, it is a warning that countries need to have bigger and better stockpiles so that oil shocks like this can’t affect them – China, for example, has been increasing its stockpiles while other countries have let them decline. Others will draw the lesson that they must increase their pace in switching to renewable forms of energy.
However, coal, which had been seeing a downturn, even in China, is now seeing a resurgence that could be further encouraged by faltering oil and gas supplies.
Energy security or indeed energy independence is a topic of prime concern in many countries, including the UK where the debate about renewing the drive for North Sea oil and gas is receiving much attention. Already in the UK there is a growing realisation that energy prices are too high and that this is causing a different sort of resilience problem, by making it extremely hard for some foundational industries to compete.
Increasingly, governments need to realise that resilience is going to be the key challenge of the next decade. Whether it is energy, critical minerals (see our analysis of the global lithium supply chain) or the ability to create the fundamentals of industry in the form of base chemicals, industrial resilience is something that has been overlooked for far too long.
Elsewhere, steps are being taken to overcome this issue and build resilience into the sector. Taiwan, for example, has recognised the problem and C&I has reported the steps the country has taken to set about building resilience into its pharmaceutical sector (see Taiwan plans pharma resilience upgrade).
As this all suggests, resilience comes in a variety of forms, appropriate for the specific situation, something upon which the Middle East conflict has refocused attention.
This month also marks an anniversary for SCI. At a meeting on 4 April 1881, presided over by Sir Henry Roscoe and attended by some other of the most important chemists and industrialists of the age, it was decided that the new group should be called the Society of Chemical Industry. Much has changed for SCI in the last 145 years but the aim – to help bring science from the lab into industry quicker for the benefit of society – has never wavered.
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