It seems that Donald Trump has succeeded in overcoming the bad management of his first term of COVID-19 with the great economic crisis and the incredible scale, which he has done. In a recent interview, the Head of the International Energy Agency (IEA) Fatih Birol said that the current energy crisis is about to become “worse than the 1970s.” Exactly how bad is that? The answer, unfortunately, is that this has the potential to be the worst recession since the Great Depression.
The main reason for this is the last fifty years of globalization following the oil shocks of 1973-74 and 1978-79 mentioned by the IEA. Unlike in the 1970s, growing global economic interdependence and diversification of the Persian Gulf economy means that more sectors are affected by the current crisis than during the oil crisis. Although it is easy to focus on the immediate, clear consequences of rising energy costs, such as Gas and diesel prices are rising across the countrythese may be just the beginning of a larger, worse economic crisis that will cause lasting harm to the entire world.
A good place to start to understand the scope and scale of our current crisis is the world of energy. As has become quickly known since the start of the war, about 20% of the world’s oil and natural gas flows from the Persian Gulf to global markets through the narrow Strait of Hormuz.. The Iranian embargo, along with attacks on oil and gas facilities across the region, has shut down this vital supply chain and caused more than double the supply disruption. 9% of the global reduction occurred during the 1973 Oil Embargo. What do energy experts predict? This crisis will be “worse than COVID-19” and beyond the barriers of 1973 is the risk that attacks on critical infrastructure could permanently reduce world supply. This is in stark contrast to the 1970s when downsizing was voluntary and easy to deal with.
Rising prices at the pump are the first and most obvious impact, but some areas are facing a stronger impact than others. Throughout East Asia, economic planners have been to beat the ice preparing for the coming storm. The Philippine government has cut the work week for civil servants to four days as the Vietnamese government encouraged anyone to work from home to do so. Thai workers are asked to turn off the air conditioning, swap suits for t-shirts, and avoid using the elevator as much as possible when unnecessary overseas travel is cancelled. United Airlines announced on Friday, March 20ththat it expected the price of oil to remain above $175 per barrel until 2027 and was reducing less frequently used air routes in order to reduce fuel costs. These disruptions are one of the consequences of the electricity crisis, as rising prices and falling supplies become real shortages. energy balance. In economic terms, this means that there is less disposable income as disposable income increases due to rising fuel prices.
Unfortunately, this problem is not limited to the energy sector. Since the 1973 Oil Shock, the rulers of the Persian Gulf have been diversifying their economies by entering into sectors such as energy production, incl. phosphates and heliumas well as high-quality service industries such as technology and finances. Although experts in the region have been debating the success of these policies at home, there is no doubt that they have succeeded in making world markets more dependent on the Persian Gulf for these important resources. The destruction of the Strait of Hormuz has sent industries that depended on these products to ruin.
For example, helium is needed for production computer chips and medical technologies such as MRI systems, and the loss of Qatar’s helium industry, which is responsible for almost a third of the world’s production, has created something. production crisis for both sectors. Computer chips are a very important supply chain constraint because many consumer goods, such as cars, cell phones, and many home appliancesrely on them for basic functions. The same is true of phosphates, which are needed for composting. Saudi Arabia is the sixth largest producer in the world. Disruption of their business, as well as the stoppage of natural gas shipments it is also important for fertilizer productioncaused a similar disaster in one of the most important factors for modern agriculture around the world.
The services side of the coin is equally bleak. The relationship between oil, wealth and finance goes back to the 1970s, and petrocapital—the financial assets generated by oil profits—has been essential to oiling global markets. References from similar sources, as is already the case with the growing flow of capitalhave led to financial problems in the past and are to create to do so again. Tech, on the other hand, is the latest bet made by the Gulf as the region’s wealthy have already invested billions of dollars in the growing AI industry and AI tools. This industry is also, as technology journalist Ed Zitron pointed outit depends heavily on the infusion of new money to stay afloat, capital that is unlikely to come in any measure from the war-torn Persian Gulf in the near future.
No matter how you divide it, there is no doubt that the immediate consequences of this economic crisis will be bad, and if these were only temporary problems, it would be one of the most severe disasters in the 21st century and is comparable to 2020 or 1973 if all the above were temporary. Unfortunately, that may not be the case. Since the start of the war, the unprecedented closure of the Strait of Hormuz – and for a long time, the possible permanent loss of oil and gas capability across the region—has become a reality on a scale not seen since Saddam Hussein burned the oil fields of Kuwait during the first Persian Gulf War.
For example, Qatar expects to take three to five years to repair the damage caused by some of the world’s gas producing areas. Mining in the Strait of Hormuz will take months, perhaps longer, cleaning especially if the fight is increasing. This loss of ability is also based on the assumption that the current situation is the worst it will ever get. Donald Trump, as he often does, may do this if the United States follows through with a threatened attack on Kharg Island, home to 90% of Iran’s oil exports.
The destruction of this facility could cause significant damage to the infrastructure of the Gulf, as the loss of foreign power could trigger a similar response from Iranian forces against critical facilities such as the port of Ras Tanura and the Saudi Aramco refinery. Such damage would ensure long-term restrictions on world energy supplies, increase the ongoing flow of money from the Persian Gulf, and also disrupt the oil and gas revenues needed to make the Gulf’s financial system work. All of the above does not solve the political instability in the already turbulent region, but it can be said that any negative political development could discourage foreign investment needed to rebuild the region’s infrastructure.
Although many advocates of power transition have argued this would be a great opportunity to accelerate much needed social changesuch a change will occur under unfavorable conditions. Although renewable energy is faster, cheaper, and easier to build in abundance than carbon-based energy, it will not be fast enough to stop the immediate pain for people around the world, some of whom cannot respond to such a crisis. We also face the problem of Trump’s inevitable resistance to the best, most effective solution to the current energy crisis.
Make no mistake: the biggest risk everyone fears i is coming, and it is a product of Trump’s illegal war. It will be worse than COVID-19 and the effects will last for generations. However, that same crisis can also be an opportunity to change our economy and our society for the better. Oil and gas may run out along the way just like wind, solar power and batteries prepared to replace them.
The resulting picture is The gas station is closed during power outagesfrom the Seattle Municipal Archives
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