In 2062, the world may be a futuristic utopia with elaborate robotic contraptions, holograms, and whimsical inventions, like flying cars that morph into briefcases after sending the kids in glass pods to Little Dipper Elementary. The outer-space home is filled with push-button conveniences including 3D food printing technology along with real-time virtual visits with care providers.
This now not-so-distant future—the premise of the popular American animated sitcom The Jetsons that hit the airwaves in 1962—might be nearer than we think, especially the part regarding healthcare.
The idea of patient-centric, personalized, and at-home medicine is no longer a theory, let alone a wild idea whipped up by the imagination of Hanna-Barbera cartoonists from 60 years ago. It’s precisely the type of healthcare that Jay G. Wohlgemuth, MD. senior vice president, R&D, medical and chief medical officer at Quest Diagnostics, thinks is just at our fingertips. In his eyes, a healthcare system with a seamless, highly engaging, and online medical experience around preventative and chronic care is not out of reach.
Wohlgemuth envisions all the necessary information—questionnaires, blood samples, biometrics (e.g., waist circumference and height)—will enable preventive care recommendations at home. “It’ll be done by artificial intelligence and reviewed by a clinician, who can run through the analysis and check off prescribing cholesterol medication or sending a colorectal screening kit for cancer,” said Wohlgemuth. “You will only have to come in to see a doctor or go to a health care system when there is an issue like getting a knee replacement.”
House calls 2.0
One of the silver linings of COVID is that people looked for ways to interact with health care from the comfort of their own homes. Coming out of the pandemic, people now embrace, appreciate, understand, and trust at-home testing and telemedicine more. Virtual models like Telehealth do not require patients to go to a pharmacist, have a laboratory test, or even visit their physician to relay any of this information.
And beyond COVID, telemedicine has an important role in our healthcare. “Take the example of people in remote areas, like Appalachia and the Gulf States, who live hundreds of miles away from a pharmacy or are homebound but should continue to have access to healthcare and, more so, precision medicine,” said Jeffrey A. Shaman, PhD, MS, the chief science officer at Coriell Life Sciences (CLS). “What’s more, academic health centers are not typically in rural areas, and that’s where some cutting-edge work is being done. To get those living in the Bayou to benefit from the work these good academic institutions are doing, we need to reach out and make at-home healthcare easier and less intimidating.”
The irony of the situation, to Shaman, is that doctors used to go to people’s homes making house calls. “We’re kind of returning to house calls in a way,” said Shaman. “We’re also enabling patients to have the specialist show up and not just the family doctor. Precision medicine is about giving people the power to ask questions and be advocates of their own healthcare in a comfortable environment.”
Shaman points to a study demonstrating that at-home testing and care outcomes result in clinical and economic improvements. Comparing members that opted into the program to those who did not (i.e., identified interventions and controls, respectively), the paper demonstrates an average calculated $218.34 savings per patient per month. Those people with comprehensive medication management who spoke with a pharmacist to create a medication action plan, those participants never had to leave the comfort of their homes for any of this. Moreover, there was a 1.9%, 6.8%, and 14.9% reduction in the outpatient emergency department and inpatient events, respectively, suggesting an increase in the use of sound, scalable health care.
User acceptance has gone up not only from a patient perspective but also gained traction from the physician’s standpoint. With telemedicine and at-home testing, physicians don’t need to feel like they must be geneticists, radiologists, oncologists, cardiologists, etc. when they have a pharmacist and specialist assisting them through this at the center of care. “We find that the physicians have been more willing to integrate and adopt pharmacogenomics into their practice when they have the pharmacist to help because now, they don’t have to be a specialist in every medication,” said Shaman.
On top of that, Shaman would have assumed that the new generation of doctors would be dialed into all this new tech, whilst a lot of the geneticists and older generation of doctors would say that they didn’t need it and already knew everything. To his surprise, Shaman found that it was the other way around. “Some older doctors said that while they always had a hunch, they would much prefer if they could give their patient a test and get an actual scientifically-based result.”
We (almost) have the technology
In addition to patient and provider adoption, there are significant barriers to the widespread adoption of patient-centric, precision medicine. For example, the technology infrastructure needs to be built to have a seamless interaction that interfaces with the complicated existing healthcare IT systems and electronic medical records (EMRs). Wohlgemuth said, “It’s not just that we must develop software that will engage you. We must do it in a way that links into that healthcare system, which is pretty fragmented. The software to engage you around your preventative care and telemedicine, that all exists, but figuring out how to make all the software come together is a whole other challenge.”
Another barrier is that more home-based diagnostics need to be validated. One of the significant breakouts of the COVID pandemic was the conversion of respiratory viral testing to home-based self-collection. Showing off one of Quest’s new self-collection devices for serum plasma or blood, which gets plenty of liquid to enable lots of testing, Wohlgemuth said that the technology exists today but needs to be validated and brought to market for many indications, such as diabetic and transplant monitoring panels, and preventative care. He thinks that 90% or more of lab testing can be done from home, a home-based phlebotomist, a patient service center, or a retail site. “You need the home-based lab to bring it to life at scale. 95% of preventative healthcare can be done at home with telemedicine and electronically prescribing for labs and drugs when those components are in place.”
While there has been so much growth in the genomics space, with more and more human samples being sequenced, accessing genomics data is far from ubiquitous. It is not commonplace for a person to be able to access their genomics data, and have it kept in a useful format for future analysis as our health changes over time. “There’s a development on the horizon now, via a collaboration between Quest and Boston Children’s Hospital, to give you your genomic data on a zip drive or a cloud in a standardized format so that anyone in the future at your behest can analyze your genetic data for you,” said Wohlgemuth. “If you had a whole-exome in a physical format or on the cloud, you could have a clinician look at it any number of years from now.”
Breaking the healthcare mold
While we already have a lot of technology, Wohlgemuth thinks it takes a long time to implement change in the healthcare system. The U.S. healthcare system was built around physicians and hospitals when things couldn’t be done remotely because we didn’t have the technology, resulting in an extensive, concentrated healthcare system localized to hubs. Until the last ten years, the whole model was to bring patients to the healthcare setting for everything, even for a doctor to have a conversation with a patient to communicate that they need to have ‘labs’ done. Physicians and healthcare systems are paid to see people in person and perform procedures.
However, this vision is happening at a glacial pace in the US standard, brick-and-mortar health systems. Wohlgemuth thinks this is partly because the incentives are not aligned. “I’m very optimistic that all the pieces are there, but incentives are still a problem because the current healthcare system is still mostly ‘fee for service,’” said Wohlgemuth. “There’s a real incentive to do things to people and to see people in person with facility charges. Healthcare should be designed around the consumer. We have all these tools, so how can we make it happen?”
But it is not as if these trends toward patient-centric health can’t also benefit insurers and health systems. Wohlgemuth thinks it makes a lot of sense for someone managing spending at a health plan to ensure that if people can get tests done at home or a retail location, it will be much cheaper for the insurers. But there’s still a lot of pushback from the insurer side.
One trend in this space that Wohlgemuth is excited about is employer healthcare. “In an employer-sponsored self-insured health plan, which is where 90 million people get their healthcare right in the US, the incentives are pure because employers run their health plan,” said Wohlgemuth. “At Quest, we have 60,000 members for an average of 10 years, some of them for 40 or 50 years. We are paying for all their healthcare. At the same time, they’re paying for a piece of it. We’re on the hook for their healthcare. So, when you’re in that environment, all the incentives are suddenly aligned: improved patient experience, lower cost of healthcare, and improved outcomes.”
Wohlgemuth thinks that the best way to do that is to deliver directly to the employees in their homes in a virtual primary care experience. “It’s a thing of beauty because we’re doing our employees a great service, and we’re not paying an outrageous amount for it. The reality is a lot of people are not going to have healthcare unless the employer provides it. They’re not going to wander in to see a doctor. So, the employer healthcare arena is where consumer-driven healthcare comes to life.”
The preventative care paradox
Michael E. Chernew, PhD, Professor of Health Care Policy at Harvard Medical School, said that, in a fee-for-service system where people get paid for what they do, there’s a lot of concern that testing and treatments are overdone. “There are sometimes limits on how certain types of services are reimbursed, which might make it challenging in our current fee-for-service system to use those types of care,” said Chernew. “In other words, we will restrict access to a certain number of tests or limit the provider network in ways that may be considered impediments to patient-centered care.”
The economics of preventative care is very case-dependent. For example, Chernew doesn’t think that more testing saves money. “More testing doesn’t save money, even if it’s used for preventative care,” said Chernew. But he doesn’t think that the healthcare system should ignore at-home tests. “Like every other medical service, testing can be underdone and overdone. The more people are tested, typically, the more money gets spent. That doesn’t mean there aren’t examples of testing that couldn’t save money. But as a general premise, if you take a population and dramatically increase the amount of testing, you will increase the spending. You may improve health in ways, but it’s very case dependent.”
Even in the case of preventative testing, Chernew thinks lots of money is wasted. For example, a system of continual testing that is very aggressive will, just by chance, get false positive results that don’t necessarily indicate a health problem. “If I just were to take your blood pressure hourly, I’m going to find some readings that are above normal and may decide that I’m now going to put a patient into a protocol, which could end up being bad for your health and spending,” said Chernew. Getting more information is applicable only if it’s integrated wisely. While there was already plenty of high-tech at-home testing that could be brought into healthcare, the COVID era has triggered a boom in the development of at-home testing. But Chernew cautions that at-home testing must be used practically and not be overdone, saying, “While I’m not opposed to at-home testing, I also don’t believe that everything at home will make things cheaper and more information automatically makes care better.”
Ideally, the financing system would be set up to separate these services’ high- and low-value utilization. Because the world is so complex, the financing system is imperfect. On the one hand, we’re often being too permissive—encouraging a lot of utilization that probably shouldn’t be done but making sure we get all the high-value use. On the other hand, we’re often too restrictive; in other words, our concern about overuse may impede access to high-value things, even if it’s cutting out low-value items. The system’s merits boil down to how well we can develop financing, information, and technology to get that level of clinical nuance where we are promoting the use of high-value tests.
Chernew said whether a test is high- or low-value depends on the context. For example, when testing many low-risk people, there will be many false positives, depending on how low-risk they were. “When many people are tested, there will be many more findings, which might be good, but, on the other hand, it might be harmful,” said Chernew. “So, the testing paradigm needs to be thought through thoroughly. If I took an otherwise healthy person and gave them remote patient monitoring for various conditions, I’m much more likely to mess things up than make things better. But if I took somebody who I knew had a lot of conditions in terms of fluctuation in their blood sugar, remote patient monitoring might help.”
“I think we haven’t yet fully understood the ramifications,”said Chernew. “Even then, most patient monitoring has a lot of potential. But there are a lot of risks and challenges associated with remote patient monitoring.” Chernew said that there’s a lot to be done to understand how to use it and how to use it differently based on different patients. It’s a question of building in the structures to understand the information and how it will be used. “How you build the systems around using that information matters because it’s not evident that the care patterns would be better if everybody were tested way more,” said Chernew.
Shaman pushes back on the idea that too much testing will lead to more unnecessary issues. “I understand that too much data will overwhelm our physicians, but the resolution afforded to us by new assays and new tests has, for the most part, been helpful. If we follow the science and understand the outcomes, we can use that resolution to increase our understanding of where the threshold should be. Without the data, we can’t make those determinations.” Shaman thinks that precision health should use as much information as possible. For example, take pharmacogenomics. Suppose the goal is to improve medication management. In that case, Shaman imagines that the health care system will want to ensure that all the risks associated with a patient’s medication regimen, such as drug-drug interactions, are accounted for. The key, according to Shaman, is that the data needs to provide medically relevant and clinically actionable results.
Dialing in dosages
But now, we are seeing more approaches beyond pharmaco-genomics and individualized treatments tailored to genetics as precision medicine. There are many drugs where physicians will make a diagnosis, write a script, and three months later, they come back and ask a patient how they are feeling. But patients can only really remember the last few days—not the last three months. So, the level of information that the clinician is using to decide is minimal, yet that information could potentially warrant a dose change. If that information can be captured to create an aggregated view of the last few months, clinicians may be able to decide whether a dosage should go up or down.
There’s a huge opportunity space for precision medicine in dosing. “Precision medicine has often been viewed as the domain of high-cost oncological drugs,” said Hakim Yadi PhD, CEO of Closed Loop Medicine—a U.K.-based TechBio healthcare company developing combination products of drug and software, where the software, as a medical device, informs the precision care of that therapeutic and changes the dose of that therapy. “But every drug needs to be given in a precise way. That’s where we are trying to get to, which is a grand vision. We should consider dose optimization of every therapeutic, old and new.”
Yadi believes that the vision for how you do that is through combination therapeutics that link digital health with existing therapeutics. “Every time a patient takes a drug, the dose that will deliver the optimal balance of benefits versus unwanted effects should be prescribed. But it’s not. There’s a lot of ‘one size fits all’ and guesswork. And little follow up of the patient to fine tune.,” said Yadi.
The British company’s approach includes a Software as a Medical Device dosing engine. An important aspect is taking an outcome-focused approach, with dose adjustment based on longitudinal data. That data may be coming from a diagnostic, device, or patient recorded outcome, whatever it is that’s required to give the feedback loop to inform the optimization of that therapy. Closed Loop Medicine has taken a 21st-century medicine approach, incorporating elements of a pharma company along with big tech, to drive efficiencies in healthcare delivery and deliver better outcomes for patients through precision medicine.
Many elements need to come together to deliver this: quality systems, technical, regulatory and commercial. This is all platform, with the therapies and data collected, depending on the indication. Closed Loop Medicine is not changing the ingredients of the standard of care, just optimizing how they are used. “If we take blood pressure management for hypertension, currently this involves a blood pressure cuff reading, although the technology is evolving fast,” said Yadi. “We want to work with the existing standard of care technology, but integrate new tools as they emerge. Another indication that we are looking at will require a blood test and a resulting lab result. The engine is the same, the inputs and outputs are different.”
Personalized printed prescriptions
Today, many patients are coming through the door for things that could have been done remotely in an automated way. In the future, diagnostics and combination medicines will help inform clinical decision-making. Safely automating that decision-making, incorporating appropriate AI approaches, will be the big tech transformation that ultimately happens. Availability of clinicians is arguably now the biggest health challenge and freeing patients from dependency of frequent doctor interaction will improve quality and cost. That is the future to which we are building. Closed Loop Medicine is applying its platform to a whole range of therapeutics. “If you look at the pharmacopeia, there’s only a handful of very well-dosed drugs, such as warfarin and insulin,” said Yadi. “But that trail quickly disappears.”
So, Yadi’s long-term vision is a more tailored opportunity for individual patients. “We are doing our own drug development, working with drug manufacturers to develop our formulation that will lend itself to a more tailored approach,” said Yadi. “Although we’re far away from an Amazon drone-delivered 3D-printed pill, we are mindful of laying the right foundations. I believe we are making significant steps towards that.”
Yadi imagines that today’s children will be telling their parents in twenty years: When you were younger, they used to give you medicine but didn’t know if it was going to work or if the dose was right for you. That’s mad!
Jonathan D. Grinstein’s wonder for the human mind and body led him to an undergraduate education in Neural Science and Philosophy and a doctorate in Biomedical. He has 10 years of experience in experimental and computational research, during which he was a co-author on research articles in journals such as Nature and Cell. Since then, Jonathan hung up his lab coat and has explored positions in science writing and editing. Jonathan’s science writing work has featured in Scientific American, Genetic Engineering and Biotechnology News (GEN), and NEO.LIFE.link pandemic testing genetic medication therapy
Zika Vaccine Targeting Nonstructural Viral Proteins Found Effective in Mice
UCLA scientists report positive preclinical results on the safety and efficacy of an RNA vaccine (ZVAX) against the mosquito borne Zika virus that severely…
Positive preclinical results on the safety and efficacy of an RNA vaccine (ZVAX) against the mosquito-borne Zika virus that severely compromises brain development in children of infected mothers, were published in the journal Microbiology Spectrum on September 28, 2022 “Replication-Deficient Zika Vector-Based Vaccine Provides Maternal and Fetal Protection in Mouse Model.” The investigators tested the vaccine in pregnant mice and report the vaccine prevents systemic Zika infection in both mothers and developing fetuses.
“The ongoing COVID-19 pandemic has shown us the power of a strong pandemic preparedness plan and clear communication about prevention methods—all culminating in the rapid rollout of safe and reliable vaccines,” said senior author of the study, Vaithilingaraja Arumugaswami, DVM, PhD, an associate professor of molecular and medical pharmacology at the University of California, Los Angeles (UCLA). “Our research is a crucial first step in developing an effective vaccination program that could curb the spread of Zika virus and prevent large-scale spread from occurring.”
Engineering the vaccine
The experimental vaccine is composed of RNA that encodes nonstructural proteins found within the pathogen that trigger an immune response against the virus.
Arumugaswami said, “Engineering the vaccine involved deleting the part of the Zika genome that codes for the viral shell. This modification both stimulates an immunogenic reaction and prevents the virus from replicating and spreading from cell to cell.”
Eliminating structural proteins that mutate rapidly to escape the immune system also ensures that the vaccine trains the recipient’s immune system to recognize viral elements that are less likely to alter. The researchers packaged the replication deficient Zika vaccine particles in human producer cells and verified antigen expression in vitro.
“We deleted not just the gene responsible for encoding the capsid, but also those encoding the viral envelope and membrane. This vaccine is replication-deficient—it cannot spread among cells,” said co-author of the study, Nikhil Chakravarty, a master’s student at the UCLA Fielding School of Public Health.
Chakravarty clarified, “The deletion itself does not lead to stimulation of immune response but it makes this vaccine safer by rendering it replication deficient. The nonstructural proteins encoded by the RNA packaged in the vaccine stimulate more of a T-cell immune response that can specifically recognize Zika-infected cells and prevent viral replication and the spread of infection.”
The team showed increased effector T cell numbers in vaccinated versus unvaccinated mouse models. Using mass cytometry, the researchers showed high levels of splenic CD81 positive T cells and effector memory T cell responses and low levels of proinflammatory cell responses in vaccinated animals, suggesting that endogenous expression of the nonstructural viral proteins by the vaccine induced cellular immunity. There were no changes in antibody mediated humoral immunity in the vaccinated mice.
“We saw complete protective immunity against Zika virus in both pregnant and nonpregnant animals, speaking to the strength and utility of our vaccine candidate,” said Chakravarty. “This supports the deployment of this vaccine in pregnant mothers—the population, perhaps, most at need—upon further clinical evaluation. This would help mitigate some of the socioeconomic fallout from a potential Zika outbreak, as well as prevent neurological and developmental deficits in Zika-exposed children.”
The investigators administered the RNA vaccine using a prime-boost regimen where an initial dose was followed up by a booster dose. To estimate the durability of the vaccine, the researchers monitored the mice for a month-and-a-half, which is equivalent to approximately seven years in humans.
Chakravarty said, “Since the vaccine is geared toward stimulating T-cell response, we anticipate it will induce longer-lasting immunity than if it were just stimulating antibody immune response.”
The global Zika outbreak in 2016, led to efforts in developing effective therapies and vaccines against the virus. However, no vaccines or treatments have been approved for Zika virus yet.
“Other Zika vaccine candidates mainly focused on using structural proteins as immunogens, which preferably stimulates antibody response. Our candidate is unique in that it targets nonstructural proteins, which are more conserved across viral variants, and stimulate T-cell-mediated immunity,” said Chakravarty.
Epidemiological studies have shown that the Zika virus spreads approximately every seven years. Moreover, the habitats of Zika-spreading mosquitoes are increasing due to climate change, increasing the likelihood of human exposure to the virus.
“Given that RNA viruses—the category to which both Zika and the SARS family of viruses belong—are highly prone to evolving and mutating rapidly, there will likely be more outbreaks in the near future,” said Arumugaswami.
“It’s only a matter of time before we start seeing the virus spread again,” said Kouki Morizono, MD, PhD, an associate professor of medicine at UCLA and co-senior author of this study.
Before the vaccine candidate can be tested in humans, the researchers will be test it non-human primate models.vaccine preclinical genome genetic rna pandemic covid-19 spread
Why is Russia sending oil and gas workers to fight in Ukraine? It may signal more energy cutoffs ahead
Russian President Vladimir Putin has not hesitated to use energy as a weapon. An expert on global energy markets analyzes what could come next.
Russia’s effort to conscript 300,000 reservists to counter Ukraine’s military advances in Kharkiv has drawn a lot of attention from military and political analysts. But there’s also a potential energy angle.
In its call for reservists, Russia’s leadership specifically targeted oil and gas workers for the draft. One might assume that energy workers, who provide fuel and export revenue that Russia desperately needs, are too valuable to the war effort to be conscripted. But this surprising move follows escalating energy conflicts between Russia and Europe.
The explosions in September 2022 that damaged the Nord Stream 1 and 2 gas pipelines from Russia to Europe, and that may have been sabotage, are just the latest developments in this complex and unstable arena. As an analyst of global energy policy, I expect that more energy cutoffs could be in the cards – either directly ordered by the Kremlin to escalate economic pressure on European governments or as a result of new sabotage, or even because shortages of trained Russian manpower as a result of conscription lead to accidents or stoppages.
Dwindling natural gas flows
Russia has significantly reduced natural gas shipments to Europe in an effort to pressure European nations who are siding with Ukraine. In May 2022, the state-owned energy company Gazprom closed a key pipeline that runs through Belarus and Poland.
In June, the company reduced shipments to Germany via the Nord Stream 1 pipeline, which has a capacity of 170 million cubic meters per day, to only 40 million cubic meters per day. A few months later, Gazprom announced that Nord Stream 1 needed repairs and shut it down completely. Now U.S. and European leaders charge that Russia deliberately damaged the pipeline to further disrupt European energy supplies. The timing of the pipeline explosion coincided with the start up of a major new natural gas pipeline from Norway to Poland.
Russia has very limited alternative export infrastructure that can move Siberian natural gas to other customers, like China, so most of the gas it would normally be selling to Europe cannot be shifted to other markets. Natural gas wells in Siberia may need to be taken out of production, or shut in, in energy-speak, which could free up workers for conscription.
Restricting Russian oil profits
Russia’s call-up of reservists also includes workers from companies specifically focused on oil. This has led some seasoned analysts to question whether supply disruptions might spread to oil, either by accident or on purpose.
One potential trigger is the Dec. 5, 2022, deadline for the start of phase six of European Union energy sanctions against Russia. Confusion about the package of restrictions and how they will relate to a cap on what buyers will pay for Russian crude oil has muted market volatility so far. But when the measures go into effect, they could initiate a new spike in oil prices.
Under this sanctions package, Europe will completely stop buying seaborne Russian crude oil. This step isn’t as damaging as it sounds, since many buyers in Europe have already shifted to alternative oil sources.
Before Russia invaded Ukraine, it exported roughly 1.4 million barrels per day of crude oil to Europe by sea, divided between Black Sea and Baltic routes. In recent months, European purchases have fallen below 1 million barrels per day. But Russia has actually been able to increase total flows from Black Sea and Baltic ports by redirecting crude oil exports to China, India and Turkey.
Russia has limited access to tankers, insurance and other services associated with moving oil by ship. Until recently, it acquired such services mainly from Europe. The change means that customers like China, India and Turkey have to transfer some of their purchases of Russian oil at sea from Russian-owned or chartered ships to ships sailing under other nations’ flags, whose services might not be covered by the European bans. This process is common and not always illegal, but often is used to evade sanctions by obscuring where shipments from Russia are ending up.
To compensate for this costly process, Russia is discounting its exports by US$40 per barrel. Observers generally assume that whatever Russian crude oil European buyers relinquish this winter will gradually find alternative outlets.
Where is Russian oil going?
The U.S. and its European allies aim to discourage this increased outflow of Russian crude by further limiting Moscow’s access to maritime services, such as tanker chartering, insurance and pilots licensed and trained to handle oil tankers, for any crude oil exports to third parties outside of the G-7 who pay rates above the U.S.-EU price cap. In my view, it will be relatively easy to game this policy and obscure how much Russia’s customers are paying.
On Sept. 9, 2022, the U.S. Treasury Department’s Office of Foreign Assets Control issued new guidance for the Dec. 5 sanctions regime. The policy aims to limit the revenue Russia can earn from its oil while keeping it flowing. It requires that unless buyers of Russian oil can certify that oil cargoes were bought for reduced prices, they will be barred from obtaining European maritime services.
However, this new strategy seems to be failing even before it begins. Denmark is still making Danish pilots available to move tankers through its precarious straits, which are a vital conduit for shipments of Russian crude and refined products. Russia has also found oil tankers that aren’t subject to European oversight to move over a third of the volume that it needs transported, and it will likely obtain more.
Traders have been getting around these sorts of oil sanctions for decades. Tricks of the trade include blending banned oil into other kinds of oil, turning off ship transponders to avoid detection of ship-to-ship transfers, falsifying documentation and delivering oil into and then later out of major storage hubs in remote parts of the globe. This explains why markets have been sanguine about the looming European sanctions deadline.
One fuel at a time
But Russian President Vladimir Putin may have other ideas. Putin has already threatened a larger oil cutoff if the G-7 tries to impose its price cap, warning that Europe will be “as frozen as a wolf’s tail,” referencing a Russian fairy tale.
U.S. officials are counting on the idea that Russia won’t want to damage its oil fields by turning off the taps, which in some cases might create long-term field pressurization problems. In my view, this is poor logic for multiple reasons, including Putin’s proclivity to sacrifice Russia’s economic future for geopolitical goals.
Russia managed to easily throttle back oil production when the COVID-19 pandemic destroyed world oil demand temporarily in 2020, and cutoffs of Russian natural gas exports to Europe have already greatly compromised Gazprom’s commercial future. Such actions show that commercial considerations are not a high priority in the Kremlin’s calculus.
How much oil would come off the market if Putin escalates his energy war? It’s an open question. Global oil demand has fallen sharply in recent months amid high prices and recessionary pressures. The potential loss of 1 million barrels per day of Russian crude oil shipments to Europe is unlikely to jack the price of oil back up the way it did initially in February 2022, when demand was still robust.
Speculators are betting that Putin will want to keep oil flowing to everyone else. China’s Russian crude imports surged as high as 2 million barrels per day following the Ukraine invasion, and India and Turkey are buying significant quantities.
Refined products like diesel fuel are due for further EU sanctions in February 2023. Russia supplies close to 40% of Europe’s diesel fuel at present, so that remains a significant economic lever.
The EU appears to know it must kick dependence on Russian energy completely, but its protected, one-product-at-a-time approach keeps Putin potentially in the driver’s seat. In the U.S., local diesel fuel prices are highly influenced by competition for seaborne cargoes from European buyers. So U.S. East Coast importers could also be in for a bumpy winter.
Amy Myers Jaffe does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.spread pandemic covid-19 oil india european europe germany poland russia ukraine eu china
Butter, garage doors and SUVs: Why shortages remain common 2½ years into the pandemic
The bullwhip effect describes small changes in demand that become amplified as they move down the supply chain, resulting in shortages. The pandemic put…
Shortages of basic goods still plague the U.S. economy – 2½ years after the pandemic’s onset turned global supply chains upside down.
Want a new car? You may have to wait as long as six months, depending on the model you order. Looking for a spicy condiment? Supplies of Sriracha hot sauce have been running dangerously low. And if you feed your cat or dog dry pet food, expect empty shelves or elevated prices.
These aren’t isolated products. Baby formula, wine and spirits, lawn chairs, garage doors, butter, cream cheese, breakfast cereal and many more items have also been facing shortages in the U.S. during 2022 – and popcorn and tomatoes are expected to be in short supply soon.
In fact, global supply chains have been under the most strain in at least a quarter-century, and have been pretty much ever since the COVID-19 pandemic began.
I have been immersed in supply chain management for over 35 years, both as a manager and consultant in the private sector and as an adjunct professor at Colorado State University - Global Campus.
While each product experiencing a shortage has its own story as to what went wrong, at the root of most is a concept people in my field call the “bullwhip effect.”
What is the ‘bullwhip effect’?
The term bullwhip effect was coined in 1961 by MIT computer scientist Jay Forrester in his seminal book “Industrial Dynamics.” It describes what happens when fluctuations in demand reverberate and amplify throughout the supply chain, leading to worsening problems and shortages.
Imagine the physics of cracking a whip. It starts with a small flick of the wrist, but the whip’s wave patterns grow exponentially in a chain reaction, leading to the tip, a snap – and a sharp pain for anyone on the receiving end.
The same thing can happen in supply chains when orders for a product from a retailer, say, go up or down by some amount and that gets amplified by wholesalers, distributors and raw material suppliers.
The onset of the COVID-19 pandemic, which led to lengthy lockdowns, massive unemployment and a whole host of other effects that messed up global supply chains, essentially supercharged the bullwhip’s snap.
Cars and chips
The supply of autos is one such example.
New as well as used vehicles have been in short supply throughout the pandemic, at times forcing consumers to wait as long as a year for the most popular models.
In early 2020, when the pandemic put most Americans in lockdown, carmakers began to anticipate a fall in demand, so they significantly scaled back production. This sent a signal to suppliers, especially of computer chips, that they would need to find different buyers for their products.
Computer chips aren’t one size fits all; they are designed differently depending on their end use. So chipmakers began making fewer chips intended for use in cars and trucks and more for computers and smart refrigerators.
So when demand for vehicles suddenly returned in early 2021, carmakers were unable to secure enough chips to ramp up production. Production last year was down about 13% from 2019 levels. Since then, chipmakers have began to produce more car-specific chips, and Congress even passed a law to beef up U.S. manufacturing of semiconductors. Some carmakers, such as Ford and General Motors, have decided to sell incomplete cars, without chips and the special features they power like touchscreens, to relieve delays.
But shortages remain. You could chalk this up to poor planning, but it’s also the bullwhip effect in action.
The bullwhip is everywhere
And this is a problem for a heck of a lot of goods and parts, especially if they, like semiconductors, come from Asia.
Most of this stuff travels to the U.S. by container ships, the cheapest means of transportation. That means goods must typically spend a week or longer traversing the Pacific Ocean.
The bullwhip effect comes in when a disruption in the information flow from customer to supplier happens.
For example, let’s say a customer sees that an order of lawn chairs has not been delivered by the expected date, perhaps because of a minor transportation delay. So the customer complains to the retailer, which in turn orders more from the manufacturer. Manufacturers see orders increase and pass the orders on to the suppliers with a little added, just in case.
What started out as a delay in transportation now has become a major increase in orders all down the supply chain. Now the retailer gets delivery of all the products it overordered and reduces the next order to the factory, which reduces its order to suppliers, and so on.
Now try to visualize the bullwhip of orders going up and down at the suppliers’ end.
The pandemic caused all kinds of transportation disruptions – whether due to a lack of workers, problems at a port or something else – most of which triggered the bullwhip effect.
The end isn’t nigh
When will these problems end? The answer will likely disappoint you.
As the world continues to become more interconnected, a minor problem can become larger if information is not available. Even with the right information at the right time, life happens. A storm might cause a ship carrying new cars from Europe to be lost at sea. Having only a few sources of baby formula causes a shortage when a safety issue shuts down the largest producer. Russia invades Ukraine, and 10% of the world’s grain is held hostage.
The early effects of the pandemic in 2020 led to a sharp drop in demand, which rippled through supply chains and decreased production. A strong U.S. economy and consumers flush with coronavirus cash led to a surge in demand in 2021, and the system had a hard time catching up. Now the impact of soaring inflation and a looming recession will reverse that effect, leading to a glut of stuff and a drop in orders. And the cycle will repeat.
As best as I can tell, these disruptions will take many years to recover from. And as recent inflation reduces demand for goods, and consumers begin cutting back, the bullwhip will again work its way through the supply chain – and you’ll see more shortages as it does.
Michael Okrent does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.recession unemployment pandemic coronavirus covid-19 congress lockdown recession unemployment europe russia ukraine
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