Off the Record: The panic buying paradox
Humans innately desire predictability. During times of crisis, it’s only natural to seek a sense of control in an unpredictable environment.While the concept of preparedness is part of our basic survival instincts, it took root as a broader movement during the Cold War as fears of nuclear annihilation ran rampant.During this time, the US Government encouraged citizens to build fallout shelters and schools even ran bomb drills — not that there’s much anyone can do to survive a mushroom cloud.Out of this anxiety, a survivalist movement grew.Survivalists, or doomsday preppers, are traditionally associated with extremism in the form of right-wing conservatism and radical anti-government conspiracy theories.The stereotypical survivalist is a white, backcountry, conservative male who may or may not also be bordering on deranged. However, as anxiety about the state of the world rises, the number of preppers globally are growing and as a result, the demographic is changing.During the height of the COVID-19 pandemic, prepping moved from a fringe culture to a mainstream response — and one that kind of seemed reasonable.With the cost of living rising and supply chains being frequently disrupted by geopolitics and extreme weather events, this movement is growing in popularity as everyday people seek self-reliance.Though the average person is unlikely to have months’ worth of supplies stockpiled in a bunker in case of complete societal collapse, they now tend to err on the side of caution.This is evident if you grab an extra carton of eggs when the shelves look a little sparse. Or if you decide to head down to the servo and fill up after reports that fuel prices are going to jump over night.These seem like perfectly reasonable decisions. The problem is when individual rationality morphs into collective irrationality.What starts out as a handful of somewhat sensible people taking minor proactive measures can quickly escalate into many people making the same decisions simultaneously. And when that feared scarcity is unfounded rather than genuine, panic buying can create the very shortages it is intended to insulate against as collective action overwhelms fragile systems.This is the panic buying paradox. And we are seeing it in real time with fuel supplies.People are rushing to buy fuel because they think it will run out, and it’s running out because they are rushing to buy it.At an industry event this morning, Prime Minister Anthony Albanese called panic buying “pretty bloody stupid”. Despite this sentiment, when I see others filling up portable fuel tanks at the bowser, I am overcome with a nagging sense that those people know something I don’t.Present concerns are understandable with Iran’s effective closure of the Strait of Hormuz driving crude oil prices well above US$100 a barrel.The Philippines have already declared a national emergency due to severe fuel shortages. And in Australia, fuel prices have increased by about 40% since the start of the war.Most Australians don’t panic buy or hoard supplies; they buy a little extra “just in case”. Are you buying an extra packet of toilet paper when the shelves look a little low? That seems reasonable when you remember the COVID-19 toilet paper crisis of the not-so-distant past. Are you a mobile business owner that just saw media coverage suggesting fuel could be 40% more expensive tomorrow? You might want to grab your keys and fill up. On second thought, grab your jerry can too.The problem isn’t that these decisions are irrational; it’s that these “just-in-case” purchases are combining with a “just-in-time” supply chain. This means stock is on trucks, not in back rooms. This keeps costs low, but it also assumes tomorrow will look exactly like today. Even a small shift along the supply chain can look like a complete system failure.During the pandemic, we saw what happens when supply chains fail to absorb external shock. Those wounds are barely healed. As a new crisis looms, it’s understandable that people want to take matters into their own hands.A perceived lack of transparency, fairness and compassion from decision-makers during unprecedented crisis eroded Australian’s confidence in their governments ability to protect them. Many Australians now are untrusting of the government to plan for times of crisis. Fairly so. The pandemic demolished public trust.Australia sits at the end of a very long and fragile fuel supply chain. Much of what we consume passes through the Strait of Hormuz off the coast of Iran. The cascading effects of the war are now dramatically interfering with our supply chains.Rather than labelling people queuing at petrol stations as irrational, we should acknowledge that we don’t know their personal circumstances. We don’t know if their livelihood depends on their access to a vehicle. We don’t know if the fuel will be used to run essential generators. Possibly most importantly, we don’t know if they have the capacity to absorb a 40% rise in fuel prices.Even if you think doomsday preppers are batty and panic buying is “un-Australian”, the lesson isn’t that people are irrational: it’s that our supply chains are ineffective.Neither survivalism nor panic buying is inherently evil. But neither is virtuous if it comes at the expense of others. The goal shouldn’t be to outlast everyone else in a crisis — it should be to build a society where there is no need to stockpile in the first place.Although politicians are urging the public not to panic, they risk encouraging the opposite effect and further fostering fear. It seems the next plight the government faces is a crisis of trust.Off the Record is The Australian Mining Review’s weekly column.
