« We will see our disposable income ratcheted down. It’ll effectively be like a massive, sudden tax increase for us and that will have all of the normal recessionary influences and pressures we would expect with an oil price spike. That loss of disposable income means less aggregate demand, which means less spending in the economy, which means a recession. »
— Oil industry market researcher Rory Johnston from an interview at The New Statesman where he comments about the recessionary effects on the economy of the oil disruptions caused by Trump's Iran war. (archived)
It only gets worse. He adds...
To be clear, if the Strait does remain closed, let’s say indefinitely, we’re not talking recession – we are talking depression. But I think in terms of, let’s say, three weeks – by that stage you’re probably looking at prices tipping up into $130, $140, $150 [a barrel] on Brent. That trickles through to all the [refined] products as well. I think that is when people will start to fill the pinch and people will begin to change behaviour. But I think that it’ll probably take a couple more months to actually enter a full blown recession. And then thereafter things get worse the longer this goes on. But let’s say the war ended today, and let’s say the Strait reopened today to 100 per cent of its prior flow – even then, I think we’re talking two to three months to renormalise the global system.
Rory is a bit of an optimist.
Iran's most potent weapon is to cut off traffic in the Strait of Hormuz. Trump's threats to "obliterate" Iran just meet with a shrug there because he and Bibi are trying to obliterate Iran anyway.
And it's relatively easy for Iran to cut off traffic at the Strait. It takes only a disposable drone costing a few hundred dollars to bomb an oil tanker. No shipping company is going to risk the loss of an expensive tanker and its cargo.
Trump may try to blame Iran but it wasn't Iran which started this war. He deserves additional blame for his war on renewable energy. Trump has made a concerted effort to keep us dependent of fossil fuels in order to please his donors from Big Oil.
