By Mariah Rush
Chicagoans are feeling squeezed by rising gas prices, following the U.S. and Israel’s attack on Iran last month. And experts say the financial pain on consumers from the Iran war won’t stop at the pump.
“It’s going to be like a snake that swallowed a mouse,” Rachel Bronson, senior fellow on energy and geopolitics at the Chicago Council on Global Affairs, said. “You’re going to see it run through the global economy for a meaningful period of time.”
That’s because Iran has closed the Strait of Hormuz, the narrow mouth of the Persian Gulf, where 20% of the world’s oil supply passes through.
It’s the largest disruption the oil industry has ever faced, according to Sam Ori, executive director of the University of Chicago’s Institute for Climate and Sustainable Growth.
“There’s never been anything in the history of the oil market that really is at the same scale as this. You’re talking about a fifth of the world’s oil supplies being disrupted,” Ori said. “There are some alternative routes, but in the best case, you’re still talking about a supply disruption of 10 [million] to 15 million barrels a day.”
He said the U.S. economy is “much different” than it was in the 1970s, when there was an energy crisis.
“We use about a third as much oil per dollar of [gross domestic product] as we did back then,” he said. “The U.S. economy is just a much less oil intense economy compared to what it was.”
Still, any kind of disruption to oil markets, even abroad, will impact prices in the U.S.
“They’ll see it at the pump, obviously, but over time, [consumers will] see it in everything being more expensive — any manufactured good that requires energy input. They’ll see it in construction costs, anything that we need to build,” Bronson said.