{"id":333504,"date":"2026-03-07T08:49:07","date_gmt":"2026-03-07T08:49:07","guid":{"rendered":"https:\/\/www.newsbeep.com\/ie\/333504\/"},"modified":"2026-03-07T08:49:07","modified_gmt":"2026-03-07T08:49:07","slug":"without-any-oil-production-of-our-own-we-are-exposed-to-fallout-from-middle-east-conflict-the-irish-times","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ie\/333504\/","title":{"rendered":"Without any oil production of our own, we are exposed to fallout from Middle East conflict \u2013 The Irish Times"},"content":{"rendered":"

What a week. Seven days of relentless Israeli<\/a> and US<\/a> bombing, the assassination of the head of state and other potential leaders of Iran<\/a>, the closure of the Strait of Hormuz, the suspension of most oil and gas exports from the Gulf, closure of the world\u2019s largest LNG refinery in Qatar<\/a>, as well as Iran\u2019s retaliatory strikes against oil infrastructure, hotels, airports and bases in all of the Gulf monarchies, but still no real sense of what the end game is for Washington.<\/p>\n

The economic impact will depend on how long this continues. If the Iranians surrender quickly, things might settle down. If they hold out for weeks, as the Serbs did when Nato bombed them in 1999, then the disruption to the global economy will be profound; it will manifest itself as stagflation, oil prices will spike. And economic confidence, that most ephemeral but critical of commercial drivers, will evaporate, leading to higher inflation and lower growth, lower investment and lower spending. <\/p>\n

Right now the world has experienced a brutal supply-chain shock: the price of freight, whether it\u2019s on the high seas, the air or overland, has spiked. In this globalised age of Anthropic<\/a> and Open AI<\/a>, we tend to forget the logistics of getting bulky things from one country to another. In reality, the global economy is as much a feat of transport as technology. When we can\u2019t move stuff about or when the risk of doing so soars suddenly then deliveries slow or grind to a halt. <\/p>\n

When this transport shock has been absorbed, the next phase will be the stagflation phase, where the economy slows but inflation rises simultaneously, culminating in higher prices and higher unemployment. <\/p>\n

Washington\u2019s strategy or tactic appears to rest on a re-run of Venezuela, whereby Donald Trump<\/a> orchestrates a mafia-style coup within the ruling elite, decapitating the boss and elevating one of the remaining dons to capo. Having identified the new boss in advance, the Americans kidnapped the old one, safe in the understanding of the fealty of the replacement who is allowed continue the racket as long as she bends the knee and pays tribute to Trump<\/a>, the capo di tutti capi.<\/p>\n

[\u00a0The five key things to watch about the economic impact of the Middle East conflict<\/a>\u00a0]<\/p>\n

But Tehran is not Caracas. In the meantime, the vulnerability of the global economy to energy prices will be tested. Since the 1970s, when the oil shock paralysed the globe, industry has become less oil dependent, but agriculture has become more reliant. <\/p>\n

We rarely hear food prices mentioned in a situation such as this, but modern fertilisers are based on the petrochemicals industry and about 30 per cent of all the world\u2019s fertilisers are dependent on inputs that stem from the Gulf. These inputs should right now be sailing through the Strait of Hormuz to help feed the world before the autumn harvest. What happens if the global agriculture cycle is interrupted? Worth a thought, don\u2019t you think.<\/p>\n

When we think about the rest of the economy, while it is true that oil intensity \u2013 how much oil we use in industry \u2013 across advanced economies has roughly halved since 1973, the impacts will still be severe. <\/p>\n

Unlike the US, which has a huge oil industry and today with shale oil production is practically energy self-sufficient, the European Union<\/a> in general and Ireland in particular remain importers. <\/p>\n

The two main oil-consuming sectors that affect everyday life are road transport and residential heating. Alternative options for fuel switching are very limited in the short-run. A sustained oil shock transmits quickly and painfully into household budgets and inflation, even if it doesn\u2019t produce a 1970s-style growth collapse. <\/p>\n

Ireland is exceptionally exposed. We obviously have no indigenous production of oil, which accounts for 55.6 per cent of all energy consumed. Imported oil is the single largest energy source in the country for transport, cars and trucks; oil makes up 93 per cent of transport energy. <\/p>\n

Irish homes are powered overwhelming by imported gas. Since the Russian<\/a> invasion of Ukraine<\/a>, most of Europe\u2019s gas comes from the Gulf or the US. Indeed, disruption to gas rather than oil might hit Europe most dramatically. <\/p>\n

Following Iranian drone attacks, Qatar halted liquefied natural gas (LNG) production at Ras Laffan on March 2nd. Qatar accounts for a fifth of global LNG exports, but 90 per cent of its LNG transits through Hormuz. Any more Iranian attacks and this situation deteriorates. <\/p>\n

This week alone, European gas prices surged by 45 per cent because EU gas storage is critically low. The wet and cold winter has ensured that European gas reserves are now at about 30 per cent, versus 40 per cent at the same point last year and well below the 54 per cent five-year average. Germany, the major consumer, has only 20.5 per cent of its gas needs in reserve; and the lower the reserve the more volatile the prices. Qatar also supplies 30 per cent of Europe\u2019s jet fuel via Hormuz routes. <\/p>\n

Some commentators are making the point that we can get oil and gas elsewhere, particularly from the US, but this overlooks the point that without the supply coming through the Strait of Hormuz, global supply tightens, sending prices skywards.<\/p>\n

Twenty million barrels of oil per day, or roughly a fifth of global petrol, pass through that narrow channel between the Gulf and Iran. It is now closed. More than 150 ships are anchored outside the Strait and most major shipping firms and insurers have suspended all operations. <\/p>\n

To strangle this chokepoint, the Iranians don\u2019t have to fire a shot: insurance companies do it for them. As the risk to shipping rises, the cost of insuring these ships rises steeply, so much so that the cost of insuring the tankers becomes prohibitive. It is better not to sail at all. So it\u2019s the threat of attack rather than the attack itself that causes the insurance premiums to surge. <\/p>\n

Therefore a blockade of maritime trade can occur without an actual naval blockade. The US president has responded to this insurance dilemma by announcing that the US navy will escort ships through the strait, but whether this goes ahead depends on the course of the war. In the meantime, the ships remain anchored. <\/p>\n

It is fascinating that in a world fixated on tech and artificial intelligence<\/a>, we forget that most of the economy is still heavy, dirty and smelly. Transportation rather than data is still the life blood of commercial life. While you might click to buy an item online, this purchase has to get to you and it does this by post, meaning by air, rail or road. <\/p>\n

As the cost of energy goes up so, too, does the price of delivery. Meanwhile, the price of food is in part determined by the price of fertiliser, and modern fertiliser comes from chemicals, underpinned by oil prices. <\/p>\n

Finally, business confidence is the energy of the capitalist economy. Undermine that and you undermine the system. <\/p>\n

While the big boys play war games, the little people suffer. <\/p>\n","protected":false},"excerpt":{"rendered":"What a week. Seven days of relentless Israeli and US bombing, the assassination of the head of state…\n","protected":false},"author":2,"featured_media":128530,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[220,3673,218,219,63563,969,5148,61,11829,60,3410,6000,1225,4444,80,90,976],"class_list":{"0":"post-333504","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-anthropic","10":"tag-artificial-intelligence","11":"tag-artificialintelligence","12":"tag-david-mcwilliams","13":"tag-donald-trump","14":"tag-european-union","15":"tag-ie","16":"tag-iran","17":"tag-ireland","18":"tag-israel","19":"tag-oil","20":"tag-open-ai","21":"tag-qatar","22":"tag-technology","23":"tag-us","24":"tag-weekendreview"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/333504","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=333504"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/333504\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/128530"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=333504"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=333504"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=333504"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}