In the turbulence of the ongoing unstable actions of an autocratic regime attempting to override all democratic processes, it is not easy to predict anything. That, of course, is part of the strategy of the would be fascist dictator; distraction and denial are the name of the game. The megalomaniacal golden ballroom and the broadly offensive triumphal arch are not only self-glorification gestures, even as the attempt to give them an absurd military excuse.
Strategically, they serve to distract us all from the ongoing efforts of the autocratic attempt to overcome the already weakened democratic processes as well as to make us look away from the horrors of the extortionate War on Iran.
But when it came to the closing of the Strait of Hormuz, the consequent impact on not just the price of gasoline at the pump, but also causing shortages and inflation, seemed inevitable. Increasing prices of diesel fuel, therefore transportation costs, and other economic consequences seemed certain if not entirely clear.
For the domestic news feed, the total chaos visited upon all the countries surrounding the Gulf of Oman, and the upheaval the closing is causing most of the international political economy, are not considered important enough for full coverage. To understand the flow of global events and crises, we must look to international sources such as Al jazeera News and experts like Malcolm Nance and other Middle East intelligence experts with direct connections to sources on the ground.
On a normal day, between 60 and 140 supertankers had passed through the Strait of Hormuz, carrying a daily total of 8.3 to 20 million barrels of petroleum products. Most recently, only around seven or eight ships have passed through the Strait each day, which is about 12.5% of the normal flow before the Trump-Netanyahu war on Iran began.
Since diesel fuel energizes almost all forms of transportation—shipping, trucking, and even most local deliveries—I expected to see both shortages and price increases somewhat like those experienced in the COVID-19 pandemic, with economic slowdowns distributed globally once the Strait was closed for a couple of months.
Right Prediction, Wrong Pace
Since about twenty percent of the world’s petroleum consumption depends on shipments through the Strait of Hormuz, after the start of the war many analysts predicted that by late July, the world would start to feel the energy pinch and the beginning of shortages of petroleum dependent products. Of course, we did see gas prices at the pump start to increase before any shortages occurred, and they continue to do so. But the oil giants know an opportunity when they see one. Unrestrained by already huge record profits, they moved quickly—far faster than the effects of the Hormuz reduction in flow. Price gouging often precedes supply shortages that would eventually drive up prices when the shortages were actually felt.
Also, many predicted both the rise in prices and shortages of products on the grocery shelves too. I found those to be compelling and expected these forecasts to be realized.
But the world is rarely as simple as the analyses we humans perform, even when we include all the variables we can think of. In the modern world, complexity rules.
What Happened?
Most analysts estimated the time it takes to move shipments from the Gulf of Oman (aka the Persian Gulf) is about 8 to 12 weeks, barring any other delays. “…for a barrel of oil loaded at the Strait of Hormuz to be shipped, unloaded, processed at a refinery, and delivered to a final consumer,” (USNI News) is reported to be about two months or more. That is why expected price increases and shortages were for mid to late July.
However, as in all attempts to forecast human behavior, the various elements in the supply chain are relatively independent actors and can behave in ways not factored into the forecast. The US drew down its strategic petroleum reserves severely to offset shortages. Other actors took similar measures, including actual reductions in fuel use by means of increasing efficiency, etc.
As a consequence of a variety of actions by governments and corporations around the world, the processes that impact the supply lines for petroleum products and all the industrial and transportation functions that rely on their energy and materials, unfolded on a much more gradual timeline than most expected. The COVID-19 pandemic offered a convenient though imperfect model for comparison.
However, any comparison of the current supply chain disruptions with the actions caused by the COVID-19 pandemic, we must consider the nature of the pandemic itself. Because of the explosive nature of the spread of the virus around the world and the deadly consequences of social interaction exposing anyone to infection, a global stoppage of all sorts of economic activity occurred rather suddenly and simultaneously. Because of global travel, the pandemic hit population centers all over the world almost simultaneously. That is a bit different than a disruption in a complex supply network for energy and materials.
Implications for Economic and Societal Futures
In a matter of weeks, at the early stage of the pandemic, many businesses shut down or slowed down their operations significantly in order to slow the spread of the disease. That is a distinctly different kind of factor leading to economic constraints. We shall continue to feel the consequences of the economic disruptions caused by the war on Iran, but they will continue to be gradual as the resolution of the conflict is delayed by the fanatical stances taken by both sides.
None of this, however, should be taken to conclude that the international energy complex is all that resilient or even rational. As we observe increasingly severe extreme weather events become more frequent, and almost no governments respond with plans to reduce modern profligate energy consumption, we can anticipate the accelerating impacts of climate chaos on economies everywhere. The total disruption that crop failures cause in specific regions can have variable effects on the global food economy, in which emerging “food deserts” are already causing famine, health crises, starvation-forced migrations, and all the consequent social and political chaos.
The supply chain disruptions caused by the War on Iran give us a glimpse into the future of a global economy that refuses to face the implications of an economic model that requires perpetual growth on a finite planet, exacerbated by long complex supply chains vulnerable to disruption at many potential choke points. Forecasting specific events and tendencies can be tricky, but major long-term trends in highly reliable data—such as the decades of increasingly precise climate change data—are hard to ignore, unless your short-term greed is more powerful than any concern for the future of humanity.
