Listen to the experts - time to wake up
Updated 10.11 | Published 10.11
Crisis is an overused word, it's just a matter of admitting it.
But it's not enough to describe what awaits the world economy if the Iran war continues.
There has to be a solution, anything else is madness.
In the meantime, it's time to activate all available crisis plans.
At 11 a.m. on Monday, the government has called a press conference on "measures against rising energy prices."
It's not an hour too early.
The last two major crises for the world economy began in the same way. With confusion and denial. It took several weeks after the collapse of Lehman Brothers in 2008 and the outbreak of the pandemic in the spring and winter of 2020 before it began to dawn on both those in power and ordinary people what had happened and what the consequences would be.
Now we are there again.
The war in Iran is entering its fourth week and the situation is only getting worse with new escalations.
The development of events is constantly changing, usually depending on what Donald Trump last wrote on Truth social.
If there are any adults left in the nice rooms in Washington and Europe, they will hopefully be working on some type of diplomatic solution that does not include washing the world economy.
But it is nothing that can be taken for granted.
During the pandemic, we learned that it is important to listen to the experts. The same should apply this time too. And they are right now shouting about how serious the situation is.
The head of the energy agency IEA, Fatih Birol, is not known as some doom-monger with a staring gaze and his own YouTube channel.
In calm bureaucratic language, he warns that the current shock could be worse than the two oil crises of the 1970s. Together. And that politicians are underestimating the seriousness.
On Friday, the IEA issued a series of recommendations that should have received much more attention. They are about working from home, choosing public transport and avoiding flying, all to save fuel. And that governments must support consumers, especially those who are most vulnerable.
The UN has sounded the alarm that the war could lead to global famine.
The financial markets have so far been rather slow to wake up to the Iran crisis, but developments in recent days have given an indication of how it will play out:
In other words: everyone is getting poorer and there is nowhere to hide.
The trend continues on Monday, with serious stock market falls.
The oil price is fairly stable, just above the levels after the rise last week, but that does not give the whole picture.
The oil price that is usually used as a reference is actually contracts for future deliveries. You can also call it “paper oil”.
The price there is currently $114 per barrel for North Sea oil, compared to under $70 when the war began.
But if you look at what buyers in Asia are prepared to pay for actual physical deliveries, the price is over $170 per barrel. The world market price is quickly heading there, and significantly higher than that.
The fact that the situation is getting worse with each passing hour is not just a matter of imagery, but of mathematics.
The stoppage in the Strait of Hormuz means that the world's supply of oil and gas is decreasing sharply, at least 10-15 percent of oil and even more for gas.
There is simply not enough oil and gas from other sources to replace it.
This gap can only be resolved in two ways – either the price rises even more or demand drops dramatically – or a combination.
Both scenarios are bad and mean that the economy will shrink.
Rationing is already underway in Asia and has also begun in Slovenia.
Fuel shortages are a real threat. As are shortages of many other products.
In ”normal” crises, central banks are usually able to support the economy by lowering interest rates. This is not possible this time because they are afraid of high inflation, instead there may be talk of interest rate increases.
What is often most unclear at the beginning of a crisis is the spillover effects.
The economy is like a heavy chain, if you move one end a little, there can be a rather violent and dangerous flick at the other.
Countries in Asia, which are completely dependent on oil and gas imports, could end up in a deep crisis that could spread.
The world's stock markets are rising and falling with the AI-boom, which is now threatened both by a shortage of chips manufactured in Asia and rising gas prices to run gigantic data centers.
Sweden then? We are not protected. The business community is vulnerable to supply problems, is exposed to energy-intensive industry in Europe that is affected by more expensive gas, and Swedes are, as is well known, sensitive to rising interest rates. Mortgage rates have already börjat höjas. begun to rise.
Our energy system is not powered by oil, but the economy is dependent on imports of fuel that have already skyrocketed. Rising gas prices mean that electricity is currently significantly more expensive in southern Sweden than in the rest of the country.
So far, the Swedish government has done little more than repeat familiar phrases such as “Sweden is prepared.”
That is not enough.
One idea that has been talked about is to temporarily lower the tax on gasoline.
That sounds good, but it is not that smart. It sends the signal that people should continue to consume fuel as usual, in a situation where access cannot be guaranteed, no matter how hysterical it sounds.
Much more tangible and far-reaching measures may be needed.
One tip is to google the 1970s.
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