The battle for oil hits the West – ‘worst case scenario’
The expert: “Bigger consequences for the US than for Iran”
Published 21.05
The US bombed the oil port on the island of Kharg and Iran responded with drone attacks.
The fear of a protracted war and a new oil crisis is now great.
– The consequences of a closed Strait of Hormuz are greater for the US and the West than for Iran, says university lecturer Mikael Höök.
US President Donald Trump says he will continue to “bomb the shit out of” Iran. This after threats from Tehran to kidnap American soldiers, following US attacks on Iran's important oil export port on the island of Kharg.
Iran responded to the US attack on Kharg by striking a large oil field in the United Arab Emirates.
Black smoke plumes were seen rising over the port of Fujairah after a drone attack on Saturday.
At the same time, the Strait of Hormuz is still basically closed.
Something that affects both Iran and the US and the rest of the Western world.
– Iran has oil exports as a significant source of income, so a total shutdown and blockade may not really be in Iran's interest. But the consequences for the US and the West are greater than they might be for Iran, says Mikael Höök, senior lecturer in the Global Energy Systems research group at the Department of Geosciences at Uppsala University.
Long conflict hits hard
A long-term conflict could hit Western Europe and the US hard.
– It risks driving up inflation. It also affects gasoline prices in the long run. Since much is dependent on transport, it also means that the prices of food and several other things risk rising in the long term, says Mikael Höök.
The world's oil reserves should last a total of 90 days. It has now been two weeks since the war started.
If the conflict lasts longer than that and the Strait of Hormuz remains blocked, it could be really noticeable.
Russian oil
According to Mikael Höök, it could also lead to opening up to Russia again.- We stopped using Russian oil for good reasons. But we see that the US has eased sanctions on Russian oil that has been at sea. As a way to try to make the mess around the Persian Gulf less complicated, he says and continues:
- We haven't seen any such signals from the EU yet, but it's a measure that could shake up oil.
If the blockade continues, oil transport can be solved in a different way.
- In the longer term, for example, Saudi Arabia could start pipelineing its oil to the Red Sea and things like that. So you get further away from the conflict.
A worst-case scenario
Mikael Höök has been teaching a course in energy security for more than ten years. He says that in the course they usually bring up a total blockage of the Strait of Hormuz as a "worst-case scenario".- So it's been on the map, then no one thought it would be so radical.
FACTS
How households can be affected
High fuel prices. Petrol and diesel are the first to become more expensive when the price of oil goes up. Prices for other modes of travel also rise quite quickly: flights, buses and trains.
High electricity prices. Energy prices are linked. When fossil fuels become more expensive – especially gas and oil – the price of electricity is often also pushed up. This can make it more expensive to heat a home and use electricity in the household.
More expensive food. Tractors run on diesel oil and fertiliser is made from natural gas. When the price of oil rises, all agricultural production therefore quickly becomes more expensive.
More expensive everything.Dyrare allt. In the long term, the cost increases will affect all parts of the economy: food, clothing, electronics. In the event of a prolonged oil crisis, the risk of high inflation is imminent.
Interest rate hikes.. The Riksbank's most important weapon against high inflation is higher interest rates. This also applies if the cause is a supply shock – for example, halted oil shipments.
Rising unemployment. When prices rise, households are forced to hold on to their money more tightly. This reduces profitability in the business sector, resulting in rationalizations and layoffs.
lower purchasing power. In times of rapid price increases, wage increases are held back in order not to fuel inflation. The result is lower real wages.
Falling housing prices. When households’ purchasing power weakens, the housing market slows down. If this leads to falling prices, it could, in the worst case, mean that households are forced to sell with residual debt, meaning that the purchase price does not cover the mortgage.
Stock market declines. When costs rise and interest rates rise, companies’ profits are squeezed. The stock market then tends to fall, which hits households’ savings in shares and pension funds.
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