Editorial|If Iran and Israel start striking more fiercely against each other, the price of oil would probably rise. The biggest economic blocs are already struggling against the looming recession anyway.
Ithe tension between rani and israel is always dangerous for the whole world, but right now the dispute would hit the world economy hard when it expands. If the crisis were to lead to a significant rise in the price of oil, the big economic blocs teetering on the edge of recession could be pushed into the abyss.
The growth of the world economy has been built year by year with less and less fossil energy. Compared to previous years, much more growth is generated through research and product development, and the world’s material resources are used more sparingly for each percentage of growth.
Renewable energy sources have come to replace oil, coal and gas. Renewable energy production is dispersed and not as susceptible to fluctuations caused by world crises as fossil energy production.
However, fossil energy has not been completely separated. For example, in many African countries, its share of total energy production is still high. In China, the share of renewable energy is increasing, but fossil energy still dominates.
The crisis in the Middle East has so far had a rather small impact on the price of oil. Due to weak global economic growth, the demand for oil has not increased much, and the world’s largest economy is fairly well protected: the United States is practically self-sufficient in terms of oil. However, Europe and China do not have this advantage.
Horror scenarios have already been built. If Israel were to retaliate against Iran’s missile strikes by, for example, striking Iran’s oil production, and Iran in turn retaliated by striking the production and oil logistics of the states it considers the United States and Israel to understand, the consequences would be dire. Iran can harness helpers for this kind of work, for example Yemen’s Houthi rebels, to whom Iran may offer even more robust weapons. The Houthis have already attacked Saudi Arabia’s oil refinery and oil storage facilities.
Jif the crisis were to expand like this, the price of oil would probably rise at the same time as all the major economic blocs are struggling against the impending recession. European economic growth is barely on the positive side, and no better is in sight. China just decided to revive domestic consumption to keep economic growth going. A major oil crisis could lead to stagflation: inflation would accelerate and economic growth would freeze.
It’s not just about the oil, but also about the sufficiency of trust. A new crisis would come in the middle of the tightening moods of the big trading blocs. Relations between China and the United States seem to be drifting towards some kind of confrontation that is not limited to a trade war. In the United States, Donald Trump’s victory in the November presidential election would be a step in this direction. Russia is messing around in the Middle East with its own interests at the same time as the relationship between Russia and the West is broken.
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Horror scenarios have already been built.
An expansion of the Middle East crisis would likely lead to a heated economic war. Various punitive tariffs have been built in the West in the way of Chinese imports, and China does not fail to respond to them.
There are other ways for crises to move towards the West. If the price of oil were to rise drastically, the oil-dependent African countries without oil reserves – that is, very poor – would suffer. This would come on top of the problems caused by climate change. The exodus from Africa towards a better livelihood could accelerate.
Esuch a crisis that no one could even benefit from it. Russia would benefit if the price of oil rose, the West would have to admit that their economies are still dependent on fossil energy, and the West’s concern and attention would shift from Ukraine to the Middle East.
The progression of the Israeli-Iranian crisis towards worst-case scenarios would inversely confirm the old adage about how economic cooperation strengthens peace. The crisis would show what happens when the multilateral world, the respect of trade agreements and the interdependence of economies move towards missile wars.
The editorials are HS’s positions on a current topic. The articles are prepared by HS’s editorial department, and they reflect the magazine principle line.
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