Oil price catastrophe will take far longer to recover from than first thought: expert

The catastrophic rise in oil prices as a result of the war with Iran will last far longer than experts had first expected, a political analyst has warned.

Elizabeth Saunders has suggested that the closure of the Strait of Hormuz will lead to a price hike on oil that will stick around for much longer than experts had first suggested. Speaking to Greg Sargent of The New Republic, Saunders claimed the longer-term struggles of the oil price hike would be felt in the US for some time yet.

She said, "This is one of those shocks that is going to be very hard to get back to any sort of status quo before the war. And there’s also no end in sight, because this is not like when the container ship got stuck in the Suez Canal, right? Remember, istheboat stuck.com? Once the boat is unstuck, the canal reopens."

"This is not going to be like that, because the Iranians have so much weaponry and power and they’re not going anywhere, because that’s where they live. And so you now basically have 20 percent of the world’s oil flow held hostage, essentially, by Iran.

"And this has always been a threat. And one of the big reasons why presidents for 20 years who’ve considered striking Iran have been deterred from doing so is because this is such a dramatic shock to the world economy. The oil market is global. And so it’s not as though we can just pump more oil out of the ground in the U.S. to make up for it. It’s a global energy market."

Nobel Prize-winning economist Paul Krugman also wrote at the time, "Although we import some oil, mainly from Canada and Mexico, while exporting even more oil, mainly from Texas, we buy hardly any oil from the Persian Gulf.

"Some people have been shocked at the way U.S. gasoline, diesel and heating oil prices have soared over the past few days. But they shouldn’t have been surprised."

"It’s almost inconceivable that 1970s-type price controls or excess profits taxes would be imposed today. So US prices of gasoline and other oil products reflect world crude prices, and the fact that America produces a lot of oil doesn’t matter at all."