The disruption to shipping through the Strait of Hormuz is not a repeat of the oil shocks that shaped global energy markets from the 1970s onward, energy economist Anas Alhajji argues. What sets it apart is its reach: the fallout has moved past crude into liquefied natural gas, helium, fertilisers, methanol and aluminium, commodities whose international trade depends heavily on the waterway. Earlier crises, by contrast, were confined to oil and energy.
Harder to negotiate than 1973
Alhajji describes the current episode as more tangled than its predecessors because the demands and objectives keep shifting and it is difficult to identify precisely who is making the decisions. In 1973 the parties were identifiable and their demands were stated openly, which made the path to resolution clearer than it is today.
What 1973, 1979 and 2022 actually looked like
The 1973 crisis, he notes, did not begin with the oil embargo. An energy crunch inside the United States preceded it by four months, and output fell by 5 percent for economic reasons linked to shifts in the value of the dollar.
The 1979 and 1980 crises overlap with the present one in a specific respect: ships were struck and mines were laid. The economic setting, however, was very different. Iran cut its production at the time from six million barrels a day to three million.
In 2022 prices climbed above 120 dollars a barrel, yet supply did not contract in the way that was widely claimed, and the United States released 180 million barrels from its strategic reserve.
Diesel is the bottleneck
The heart of today’s problem, on Alhajji’s reading, lies in refined products rather than crude alone, and diesel above all. Producing it requires medium crude, and the resulting shortage is acute. He argues it cannot be resolved simply by reaching a political agreement with Iran, because the constraint is the grade of crude available and the ability of refineries to process it.
Less refining capacity to fall back on
The remedies available now are narrower than in past crises. Significant refineries have closed and refining capacity has shrunk, which makes addressing a shortfall in refined products harder than at any previous point. The crisis, Alhajji concludes, works on several fronts at once and calls for tools different from those used to manage the shocks of earlier decades.
This story was produced in the newsroom from the disclosed sources named above.
