Are crude oil and birch logs cousins?

June 17, 2022. – I guess all of us have noticed how gasoline, electricity, and food prices have increased lately. At the same time, our eyes have opened to see how massive the Russian oil exports are. And even more dramatically, how big wheat exporters both Ukraine and Russia are.

If a commodity gets expensive or even totally unavailable, two things happen. First, the prices start to go up. Next, people start to look for substitutes. For oil and electricity substitutes mean other sources of energy like coal, nuclear, wood chips, or solar. For wheat substitutes mean other grains, corn, vegetables, etc.

We hardly ever spent a day without eating. I assume that is the reason why food is supposed to move freely on the world market. The food exports and imports shouldn’t be complicated by trade barriers, so people would have access to nutrition everywhere.

Energy and plywood are not as high in the hierarchy of needs as food is. That is one reason why oil and plywood are exposed to sanctions and import duties. Once the barriers change, the global map of trade flows starts to look different. Some arrows between countries and continents get thinner, some thicker. Russian oil will make a turn away from the western world to India and China, while Europe and the USA source their fossil fuels elsewhere.

To what extent the same logic applies to plywood? China, as a neighboring and friendly country to Russia, plays an important role in future trade. In 2021, China imported 1.9 million m3 of birch logs. It will be extremely interesting to follow how the plywood, veneer, and birch log imports to China will develop.