EDITORIAL: Buckle up, the oil shock pain is only just beginning
The way out of this crisis depends significantly on Donald Trump and the leaders of Iran. But what ever happens from here, we are in for a rough time.
This is really happening.
International Energy Agency boss Fatih Birol has warned that the energy crisis caused by the war in the Middle East had eclipsed the 1970s oil shocks “which led the world to recession”.
He highlighted that the 1973 and 1979 shocks combined removed about 10 million barrels per day, whereas the current situation had now removed 11 million barrels per day.
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By continuing you agree to our Terms and Privacy Policy.And he added that the gas shut off from the world markets was twice that lost after Russia invaded Ukraine.
Dr Birol said the crisis was “two oil crises and one gas crash put all together”.
The 1973 oil shock came about after supply restrictions were imposed by the Organization of Oil Exporting Countries in response to the Yom Kippur War between Arab states and Israel.
The shock pushed inflation in Australia to 18 per cent and unemployment went from 4 per cent to 6 per cent.
The 1979 Iranian revolution again hit global oil production, oil prices doubled, inflation in Australia went above 10 per cent and unemployment soared from 6 per cent to 10 per cent.
Dr Birol also warned of related shortages of “some of the vital arteries of the global economy, such as petrochemical, such as fertilisers, such as sulphur”.
For a while perhaps many Australians — the Federal Government included, it seems — either believed or hoped that the US-Israel war with Iran would have been finished by now.
That perhaps there would be some disruptions but that they would be minor, or managed successfully enough that it would amount to a bump in the economic road.
But the Iranian retaliation has all but closed down oil supplies going through the Strait of Hormuz, a narrow channel along the coast of Iran, cutting off about 20 per cent of the world’s oil and liquified natural gas supply.
In a bid to ease the crunch the Federal Government has released oil supplies from the emergency stockpile, temporarily lowered fuel standard requirements and appointed a national fuel co-ordinator.
Last week the IEA released recommendations to save fuel including considering working from home, avoiding travel and driving 10km/h slower.
Energy Minister Chris Bowen said on Monday more than 200 service stations in NSW, Victoria and Queensland were without at least one type of fuel and confirmed his department had modelled rationing, although he declared it was “a long way” from that.
At the weekend he conceded that six oil ships bound for Australia had been cancelled, amid renewed spotlight on how we managed to end up so reliant on importing fuel and how much fuel supply is actually on hand.
Also under scrutiny is the idea of working from home. It might be possible for some, but it won’t help the farmers, truckies and tradies who keep this country supplied and running.
Two things are becoming very clear.
One is that the way out of this crisis depends significantly on the US President and the leaders of Iran.
And secondly, what ever happens from here we are in for a rough time.
Buckle up.
