What if I told you that buying your Christmas presents and getting your deliveries from Amazon or Walmart could cost less in the future? Would you be interested in knowing why? Melting ice, that’s why.
As a New England resident, I feel the winters are warmer and I doubt the changing climate has escaped your attention, either. Temperatures in the Arctic continue to rise at an accelerated rate well above the global annual average. By the year 2050, the Arctic could have an ice-free summer. The melting of summer ice in the Arctic is not something you can call an opportunity. However, there is no reverse button and taking advantage of this new opportunity can be executed with perfection, if done right.
In the world of economics and supply chains, the maritime paths known as the Arctic sea routes have countries racing for not only cost savings but a stake in this lucrative opportunity. A container vessel traveling the Northwest Passage can reduce travel times by more than two weeks. This reduction provides many positives for us as consumers. Utilizing these routes, companies can recognize savings on fuel consumption and labor costs, which they can pass on to us as consumers. An added benefit to capturing these savings is the impact on the environment.
Cost savings do affect how we shop. But for some industries, there is a greater benefit that can generate revenue and simultaneously provide relief at the pump. With the Arctic holding an estimated 13% of the world’s undiscovered conventional oil resources and 30% of its undiscovered conventional natural gas resources, there is a global race for dominance in the region right now. Because the U.S. has failed to foresee and react to this opportunity, it has positioned itself poorly. Meanwhile, Russia and China have jumped out to a lead in this race.
Unlike highway, rail or air routes, there is no infrastructure to support year-round transiting in the Arctic. The use of icebreaker vessels is the means of creating the “infrastructure.” This is important because currently Russia owns and operates around 40 icebreaking vessels. The U.S. has three, two of which are operational and one is past its expected service life by 10 years.
There is a legitimate counterargument against using the Arctic sea routes. The concern about environmental impact is real. However, it has been proven that shortened travel time has reduced black carbon and greenhouse gas emissions for maritime travel. In support of keeping the conversation balanced, companies such as Nike Inc. and shipping giant Evergreen Marine Corp. have signed a pledge to commit to avoiding the Arctic sea routes.
America’s problem in this race is two-fold. First, the infrastructure needed is not there. Secondly, America’s geopolitical position is contingent on The Arctic Council, which is made up of eight nations that own lands within the Arctic Circle. The rotating chairmanship for the council happens to sit with Russia now. The U.S. should look to build partnerships with its allies. And although geopolitical tensions are high between Russia and the U.S., a mutually beneficial relationship must be cultivated.
America needs to demonstrate its interest in the Arctic by simply having a presence. The deficit of America’s icebreaker capability is not an insurmountable obstacle. The U.S. Coast Guard has operational authority over icebreakers and Congress has approved a request for commissioning several icebreakers. The first delivery is due in 2027. America’s continued commitment to building relationships and infrastructure in the Arctic is not only important but vital to capturing the opportunity presented there.
America’s opportunity is melting fast, but we still have time. We still have time to invest in developing infrastructure and strategies for sustainable operations in the Arctic region. So, the next time you are affected by shortages, delays or price increases due to higher shipping costs, remember that there is a solution: the Arctic sea routes.
Matthew Gomez is a senior engineer in the submarine and defense manufacturing industry, and he is pursuing an MBA at the University of Rhode Island.
