In economics textbooks, higher energy prices from the war in the Middle East display the power of the markets to efficiently decide who gets what. Yet in the real world, a cruder sort of power appears at work.<\/p>\n
The conflict has severely constricted the supply of oil from the Persian Gulf. Countries with the financial means \u2014 China, Japan, Europe, the United States \u2014 are securing much of what they need, paying whatever it takes. Some are restricting exports to hold on to what they have.<\/p>\n
That has pushed prices higher everywhere. At the same time, shortages threaten less affluent nations in Asia, sub-Saharan Africa and Latin America.<\/p>\n
Some economists are describing this as hoarding.<\/p>\n
\u201cThe market is not some harmonious allocating mechanism, but ends up being the law of the jungle,\u201d said Isabella Weber, an economist at the University of Massachusetts, Amherst. \u201cRationing by price explosion ends up being fundamentally unjust.\u201d<\/p>\n
Not for the first time, the world is reckoning with the reality that fear of scarcity can become self-fulfilling. Increased prices for critical commodities like oil and natural gas are amplified by a feedback loop of alarm and feverish buying. As national governments understandably seek to protect their economies from running out of vital goods, their purchasing affirms the impetus for others to lock up supply.<\/p>\n
This truth has been illustrated over decades by shocks to the world\u2019s food supply. A similar story played out during the Covid-19 pandemic as nations banned exports of protective gear and competed for limited doses of lifesaving vaccines. Now, the same dynamic appears to be driving up prices for energy around the globe, yielding shortages of cooking gas in India<\/a> and jet fuel in Southeast Asia<\/a>.<\/p>\n \u201cOnce again, a large unanticipated shock hits the world economy and it\u2019s every country for itself,\u201d said Eswar Prasad, an international trade expert at Cornell University. \u201cThis is not the world in it together and trying to sort out the problem jointly. Every country is going into survival mode.\u201d<\/p>\n Last week, the International Monetary Fund, the World Bank and the International Energy Agency jointly exhorted countries not to hoard stocks of energy or ban exports, warning that such measures would worsen the situation for the globe.<\/p>\n \u201cDo no harm,\u201d urged the I.M.F.\u2019s managing director, Kristalina Georgieva, as her institution downgraded its forecast<\/a> for global economic growth.<\/p>\n That admonition came after China and Thailand halted exports of jet fuel<\/a>, seeking to ensure adequate stocks at home.<\/p>\n For Thailand, any trouble for aviation poses danger for its enormous tourism industry. And worries about running out of energy had already gotten real. After the government capped the rising price of diesel, drivers massed at gas stations in a surge of panic buying<\/a>. Then the authorities got ready to ration fuel.<\/p>\n But the impact of banning exports of jet fuel spread the pain elsewhere through the region, causing shortages in importing countries like Vietnam, Myanmar and Pakistan.<\/p>\n Major airlines in Europe<\/a> have warned about the risk of running low on fuel. Lufthansa Group<\/a> cited the doubling of prices and said on Tuesday that it would cut 20,000 flights that through October.<\/p>\n Europe depends on Persian Gulf suppliers for three-fourths of its jet fuel, with the bulk moving through the Strait of Hormuz, the narrow channel at the center of hostilities between the United States and Iran.<\/p>\n The Chinese government, long concerned about reliance on energy from the Middle East, has in recent years added to its vast stockpiles<\/a> of oil and natural gas. China has also become the world\u2019s leader<\/a> in drawing electricity from renewable sources of energy like solar and wind power. Still, China buys some 13 percent of its oil from Iran, making the war a source of grave concern in Beijing.<\/p>\n Since the United States and Israel launched the war at the end of February, China has sought to replace oil shipments blocked by the conflict with increased purchases from Russia<\/a> and Brazil.<\/p>\n That is no simple exercise. Overall, China\u2019s crude oil imports have dipped about 10 percent this year compared with 2025. But China\u2019s unrivaled capacity to store oil greatly diminishes the threat of running out.<\/p>\n Smaller economies lack such capacity, putting them at a pronounced disadvantage.<\/p>\n The Philippines, which imports 90 percent of its oil from the Persian Gulf, last month declared a national emergency<\/a> in the face of spiking gasoline prices. President Ferdinand Marcos Jr. has sought to ease the strain by handing out subsidies to drivers of motorized tricycles and jeepneys, a popular form of transportation. But that has not assuaged the anger of drivers, who have staged strikes. The government has also halted collections of fuel taxes on liquefied petroleum gas \u2014 a major source of cooking fuel in urban areas.<\/p>\n In India, which also relies heavily on liquefied petroleum gas for cooking<\/a>, authorities have been raiding businesses accused of hoarding canisters, exacerbating shortages.<\/p>\n In the United States, President Trump has sought to limit economic disruptions from his war by releasing millions of barrels from the Strategic Petroleum Reserve. Japan<\/a> has pursued a similar approach.<\/p>\n European importers of energy, especially vulnerable<\/a> to turmoil in the Persian Gulf, have been pushing world prices higher by outbidding distressed rivals in Asia for jet fuel and other products.<\/p>\n Some see the skewed availability of energy as a rebuke of economic dogma that has propelled globalization since the end of World War II: the idea that greater trade yields stability by expanding access to vital goods.<\/p>\n \u201cThe post-World War II framework was based on this idea that boundaries don\u2019t matter,\u201d said Joseph Stiglitz, a Nobel laureate economist at Columbia University. \u201cThere\u2019s a global price for everything. But once you have national hoarding, that\u2019s no longer true. Borders matter.\u201d<\/p>\n This is hardly the first incidence of shortages arising from a multinational free-for-all.<\/p>\n More than half a century ago, in 1972, drought ravaged rice crops in much of Southeast Asia, threatening a staple food for tens of millions of people. The next year, Thailand \u2014 the world\u2019s largest exporter of rice \u2014 banned foreign sales to ensure adequate stocks at home. By early 1974, rice prices had risen fourfold on world markets, according to an analysis by C. Peter Timmer, a development expert at Harvard.<\/p>\n Wealthy importers like Japan and Britain paid more for rice. China cut back its exports to prioritize its own people. But Bangladesh and India \u2014 both dependent on imports, and both lacking in foreign exchange reserves \u2014 struggled to feed their populations.<\/p>\n In 2007, rising prices for wheat and corn prompted concern about the global food supply. Less developed countries that were heavily dependent on rice sought to amass holdings of that staple crop. Buyers in the Philippines sharply increased rice imports. India and Vietnam restricted exports.<\/p>\n By early 2008, rice prices had more than doubled, forcing ordinary households in much of Asia to limit their caloric intake and sending nearly a billion people into poverty, according to an analysis<\/a> by the Asian Development Bank.<\/p>\n The pandemic delivered another lesson about the perils of national rivalry for goods absent international coordination. During the first months, 76 countries imposed restrictions on the export of critical medical supplies, according to a compilation<\/a> by Simon J. Evenett, a trade expert at the University of St. Gallen in Switzerland.<\/p>\n National authorities were eager to prioritize the welfare of their own people in the face of a global disaster. But the net effect was to limit the availability of components for the manufacturing of ventilators and other equipment needed to treat Covid patients.<\/p>\n China\u2019s restrictions on shipments of protective gear<\/a> were especially potent given that its factories were the source of more than 40 percent of many such products, according to research by Chad Bown, a trade expert at the Peterson Institute for International Economics. Prices for protective gear multiplied around the globe.<\/p>\n Even in wealthy countries in North America and Europe, federal governments competed with local authorities for access to medical goods. The ability to pay trumped considerations of collective protection.<\/p>\n \u201cEven the chemicals that went into the vaccines they hoarded,\u201d said Mr. Stiglitz, the economist. \u201cThat interrupted the supply chain and made it more difficult to produce some of the vaccines. It was destructive, but everybody said, \u2018We don\u2019t know what we\u2019re going to need.\u2019\u201d<\/p>\n A similar dynamic determined which countries gained access to Covid vaccines. By the middle of 2021, three-fourths of the people who had received the vaccines lived in just 10 countries, among them the United States, Britain, Germany and France, according to research<\/a> published in a scientific journal. Only 5 percent of the human population had received a single dose of vaccine.<\/p>\n Pfizer, the American pharmaceutical giant, developed a leading Covid vaccine. The company promised to contribute 40 million doses at not-for-profit prices to Covax, an initiative aimed at ensuring that poor countries would gain protection. That volume was less than 1 percent of the 11 billion doses that were estimated to be needed to ensure that 70 percent of the world\u2019s population was covered. And by the middle of 2021, as Pfizer logged big profits<\/a> for its sale of vaccines to the highest bidder, the company had delivered only 1.25 million doses to Covax \u2014 less than it produced in a single day.<\/p>\n The consequences of leaving much of the world beyond reach of vaccines represented a collective vulnerability.<\/p>\n The energy shocks are similarly universal: Hoarding lifts market prices everywhere.Yet which countries manage to secure ample stocks is a tale of inequality.<\/p>\n \u201cRich countries outbid poor countries,\u201d said Ms. Weber, the University of Massachusetts economist. \u201cRich people ensure their luxury consumption while the majority of people gets squeezed.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"In economics textbooks, higher energy prices from the war in the Middle East display the power of the…\n","protected":false},"author":2,"featured_media":600076,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[28,101,177016,13482,4012,44452,34792,801,177018,177015,247240,261119,24697],"class_list":{"0":"post-600075","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-fees-and-rates","11":"tag-hoarding","12":"tag-international-energy-agency","13":"tag-international-monetary-fund","14":"tag-international-trade-and-world-market","15":"tag-iran","16":"tag-oil-petroleum-and-gasoline","17":"tag-prices-fares","18":"tag-shortages","19":"tag-stockpiling","20":"tag-world-bank"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/600075","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=600075"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/600075\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/600076"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=600075"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=600075"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=600075"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}