The oil crises of the 1970s led to a series of policy changes that still exist today. For example, multi-occupant vehicle lanes were created to encourage workers to carpool. A national speed limit of 55 miles per hour (88.5 km/h) ensured that these rides did not consume excessive fuel.
Cars have become more fuel efficient; We (temporarily) started driving less. But some experts say these measures, added to those adopted during the 2022 energy shock following Russia’s invasion of Ukraine, pale in comparison to what we are about to see now because of the war in Iran.
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Earlier this month, the International Energy Agency (IEA), an intergovernmental organization based in Paris, released a record volume of 400 million barrels of oil to contain rising prices.
IEA Executive Director Fatih Birol, who coordinated the release, finally broke his three-week silence and issued a warning about the magnitude of the damage caused by the war. In an interview on Monday at the National Press Club of Australia, Birol said world leaders were downplaying the energy crisis, saying the current shock was worse than previous ones.
“The seriousness of the problem has not been properly understood by decision makers around the world,” he said. “To put this crisis into perspective, as it is now: there are two oil crises and a gas crisis combined.”
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Even as President Donald Trump said early on Monday that the U.S. was in talks with Iran — and would therefore avoid attacking critical energy sources for the next five days — Brent crude prices last week soared above $110 per barrel.
Following the president’s announcement, oil prices fell by about 10% but remain stubbornly high. Economists expect the oil shock to reverberate throughout the American economy, potentially raising food prices, jeopardizing the possibility of an interest rate cut by the Fed this year (while increasing the chance of an increase), and even threatening to paralyze the economy if prices reach US$140 per barrel.
The 1970s plus the war in Ukraine
Birol detailed the numbers behind his claim, saying the losses already accumulated are far greater than those from the 1970s oil crises and the war in Ukraine.
“Many of us remember the two consecutive oil crises in the 1970s: 1973 and 1979,” he said. “In each of them, the world lost around 5 million barrels per day; combined, they are 10 million barrels per day.”
“And today, just so far, we have already lost 11 million barrels per day, that is, more than two major oil shocks combined.”
He added that after Russia’s invasion of Ukraine, gas markets, especially in Europe, “lost about 75 billion cubic meters (BMC). And now, as a result of this crisis, we have lost about 140 BMC, almost double.”
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In addition to energy shocks, Birol said the war is severing connections to some of the vital arteries of the global economy while disrupting other critical supply chains.
According to him, the conflict affected trade in petrochemicals, fertilizers, sulfur and helium, some of the main inputs for the world economy. For example, about half of the global supply of urea, an essential compound for fertilizers, passes through the Strait of Hormuz, which could impact U.S. food prices in the coming months.
“If fertilizer disruption or inflation drives up corn prices, it will be felt throughout the food supply chain,” said Ricky Volpe, agricultural economist and agribusiness professor at Cal Poly, in a recent interview with Fortune.
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Even as Trump has promised to avoid attacks on energy sources for several days, Birol said there are already many damaged oil refineries, gas fields and pipelines in nine countries, meaning that even when the war ends, it could take some time for oil prices to return to pre-conflict levels.
“Forty energy assets in the region are seriously or very seriously damaged,” he said. “It will take some time for these assets — these oil fields, gas fields, refineries and pipelines — to return to the normal capacity at which they operated before the war.”
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