Juan Cole Informed Comment
The Iran War will erode the purchasing power of American consumers this summer, according to CNBC, especially because of high diesel prices.
That projection helps explain Trump’s cratering numbers on his mind-bogglingly stupid Iran War. Even in his MAGA base, support for the war was only about 50% last May. It is now only a third. And that’s Trump’s base. In the rest of the country people want it to be over with yesterday every time they fill up the tank.
Rabobank has downgraded forecasts for Netherlands economic growth in the next two quarters to 0.2% because of high diesel and fossil gas prices, and expects the real purchasing power of the average Dutch consumer to fall. BBC Monitoring reports,”Head of Dutch Economics at Rabobank’s research division Hugo Erken describes the outlook as ‘a crisis in slow motion,’ warning that ‘the worst price rises are yet to come.”‘
The opposition People’s Republican Party in Turkey is alleging that what with the high diesel prices, Turkish farmers are “unable to produce” (Artışların çiftçiye üretim yapamaz). That would be bad news for people who, like eat food.
In the European Union, average transportation fuel inflation was over 20% in the spring and was still high at an increase year over year of 13.7% in June. It is now spiking again.
India and South Africa are also suffering from high fuel-driven inflation.
Big Oil shills have been attacking green energy for two decades as unreliable and intermittent. The sun, they say, doesn’t shine at night and wind doesn’t always blow. This line of attack has been terminally blunted by two developments, however. The rise of megabatteries on the Chinese and Californian grids, for instance, has allowed solar and wind energy to be stored and released when needed.
The other development, spurred by the Ukraine and Iran Wars, is the increasing unreliability and internmittency of fossil fuels themselves. Although it has changed tactics in the past week, Ukraine had been striking Russian refineries during the past month, creating fuel shortages and causing Russia to halt diesel exports. The Trump administration tore up the Memorandum of Understanding with Iran ten days ago and began intensively bombing that country, leading to a near re-closure of the Strait of Hormuz. Then this week the Helpers of God (Ansar Allah) government of North Yemen announced that they would target shipping to and from Saudi ports on the Red Sea through the Bab al-Mandeb (“The Gate of Tears”) that connects the Red Sea to the Gulf of Aden and thence the Indian Ocean.
These events have put Brent crude back up over $90 a barrel. The Russian halt of diesel exports through the end of this month, on top of the interruption of diesel and gasoline exports from the Gulf, poses special challenges to world economies.
Diesel is the work horse of modern societies, crucial for trucking, agriculture and industries. Prices in the US have crept back up to $5 a gallon (more in California, which is tied to the Asian market). Diesel prices are especially inelastic — that is, when it is expensive you can’t easily just cut back and use less of it. Trucking companies delivering food from farmers to grocery stores have to hit the road even if the price to fill up is high. People need food. Many trucking companies are seeing shrinking profit margins because they have to spend so much on diesel.
Photo by Rhys Moult on Unsplash
But the added cost of fuel then causes the prices of the commodities, especially food, being delivered by truck also to rise. So diesel shortages of the sort being produced by the triple bottleneck of our 21st century drone and missile wars are especially inflationary.
The Iran War had put US inflation up to 4.2% in May. After the MOU was signed and Gulf shipping resumed, the inflation rate in the US fell in June to 3.5%. But now? It will likely rise again, not only the rest of this year but well into 2027 (depending on what happens in Russia and Iran).
It seems pretty certain that a lot of working families are going to be hurt by higher food and fuel costs this year because of Trump’s foolish attack on Iran.
Consumers who can afford to do so can protect themselves by buying electric cars, coupling them with rooftop solar and home batteries. As for replacing diesel, China has developed big electric trucks and wants “at least 1.6 million electric heavy-goods vehicles on the road by 2030” according to SCMP. Since they put a world-class nincompoop in the White House, American voters will, in contrast, just suffer . . . for a very long time.
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