Milton Ezrati
The current energy crisis, luckily, will not usher in a return to the inflation-laden economy of the 1970s.
The war in the Persian Gulf—whether one supports the effort or not—presents all sorts of frightening prospects. News of negotiations briefly offers hope of an end to destruction and a clear path forward, while denials that talks have begun dash those hopes. As long as the fighting continues, it is hard to see an end to the Iranian blockade of the Strait of Hormuz, much less allow an assessment of the conditions that might ultimately impinge on shipping there. Possibilities—good, bad, and ambiguous—seem endless.
For business and the economy, however, some things are certain. The closure of the Strait of Hormuz has, for the time being, denied the world some 20 percent of its seaborne oil and natural gas supplies. That includes every bit of Iran’s production, just about all of it going to China, but also much Saudi, Kuwaiti, Qatari, and Emirati oil and gas, most of it going to Europe, Japan, and elsewhere in Asia. The other stark fact is how oil and natural gas prices have soared. The price of a barrel of West Texas Intermediate (WTI) has risen over 60 percent from $62 in mid-February to just over $100 at the time of writing. Bent crude has seen its price rise by a comparable percentage, approaching $110 a barrel.
These matters have unleashed a torrent of scare stories in media outlets that variously envision debilitating inflation akin to what happened in the economically bleak 1970s, the end of any hope for more affordable lifestyles, recession, and stagflation. All of these, of course, are completely plausible, but much else in this admittedly uncertain situation points to less dramatic and less frightening economic repercussions.
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