Surging energy prices caused by the US-Israel war on Iran are rippling across the United States economy, heaping further strain on consumers at a time when cost-of-living issues are already a primary concern. The price of crude oil increased from about $67 per barrel before the war began on February 28 to nearly $97 on Monday, as the conflict disrupts production and transport in one of the most energy-rich regions on earth. Oil temporarily passed $100 per barrel on Sunday before slightly easing back.
Rising prices could deepen frustration with the administration of US President Donald Trump and put greater political pressure on the White House, which is already struggling to address cost-of-living issues with crucial midterm elections set to take place later this year. According to price tracker GasBuddy, the average price of gas in the US has risen by 51 cents per gallon over the last week. 52-year-old Alma Newell, at a gas station in the coastal city of Goleta, California, expressed worry about price increases: "The prices have a big impact because I’m not working right now. Food and rent are already very expensive."
The disruptions caused by the war include the shuttering of the Strait of Hormuz, a key node in global transit and shipping. Iran has long said that it could close down the strait in the event of a showdown with the US and Israel. About 20 percent of global oil and a significant portion of natural gas pass through the strait, predominantly to Asia, supplies that are now stranded as traffic through the narrow waterway has ground to a halt. Iranian attacks on energy infrastructure in countries across the region have also led some countries to scale back production.
Other economic sectors are also feeling the squeeze. Goods such as fertiliser, vital for agricultural production, are seeing price increases just ahead of the spring planting season in the Northern Hemisphere. About one-third of the global fertiliser trade passes through the Strait of Hormuz. Effects of the war could ripple throughout the global economy, with poor countries especially hard-hit. Pakistan announced a series of austerity measures and cuts to fuel subsidies on Monday, while Bangladesh shuttered universities and announced restrictions on fuel use as a result of the war.
US officials and countries around the world have already discussed measures to help ease the shock of rising energy prices, including the potential release of strategic oil reserves in a bid to temporarily boost global supply. The G7 said on Monday that it would take "necessary measures" to support energy supplies, but held off on announcing the release of strategic reserves, with energy ministers set to meet on Tuesday to discuss the matter further. The US has a strategic oil reserve of more than 415 million barrels, one of the largest in the world, that it could release in coordination with allied countries. However, it is unclear when these measures would kick in and how long such steps could help fill the gaps created by the war.
Source: www.aljazeera.com