{"id":13660,"date":"2026-06-26T15:26:55","date_gmt":"2026-06-26T13:26:55","guid":{"rendered":"https:\/\/www.rivistaeco.com\/?p=13660"},"modified":"2026-06-26T15:26:55","modified_gmt":"2026-06-26T13:26:55","slug":"no-one-is-safe-from-the-energy-crisis","status":"publish","type":"post","link":"https:\/\/www.rivistaeco.com\/en\/2026\/06\/26\/no-one-is-safe-from-the-energy-crisis\/","title":{"rendered":"No One Is Safe from the Energy Crisis"},"content":{"rendered":"

The joint U.S.-Israeli attack on Iran has triggered a global shock in energy markets that has rapidly spread to economies and consumers alike. In an internationally integrated system, even the United States\u2014which enjoys a greater degree of energy self-sufficiency than most countries\u2014cannot escape the consequences of disruptions to oil and gas flows caused by the closure of the Strait of Hormuz. The reason is simple: when supply falls, prices rise. The impact propagates throughout the entire supply chain, from extraction and refining to retail distribution. The immediate consequence is a sharp increase in fuel prices, while any subsequent price declines tend to occur much more slowly. Yet the broader consequences may prove even more significant, as economic uncertainty spreads across the global economy alongside renewed inflationary pressures.<\/em><\/p>\n

 <\/p>\n

The joint U.S.-Israeli attack on Iran at the end of February set in motion a series of far-reaching economic and geopolitical consequences. Particularly significant have been its effects on global energy markets and the speed with which they have spread through different economies, ultimately reaching consumers in the form of substantial price increases.<\/p>\n

The American Illusion<\/strong><\/h3>\n

Initially, many in the United States believed that the domestic economy would remain largely insulated from the consequences of the conflict thanks to the near-complete energy independence achieved over the past decade. New fracking technologies have dramatically expanded the extraction of natural gas and oil by breaking apart porous rock formations deep underground, adding a major new source of supply to the country’s already substantial energy reserves.<\/p>\n

This illusion, however, quickly evaporated, raising a more fundamental question. If the United States can now satisfy its domestic energy demand\u2014including not only final consumption but also the extensive use of oil and gas across a wide range of industrial activities\u2014using resources extracted on its own territory, why should it be affected by a crisis taking place thousands of miles from its shores? And, above all, why are those effects transmitted so rapidly to everyday goods such as gasoline, fuelling uncertainty and concern among American consumers?<\/p>\n

From Oil Wells to Refineries<\/strong><\/h3>\n

It took only a few days to realize that the much-vaunted energy independence of the United States was not enough to shield its economy from the repercussions of the crisis in the Persian Gulf. Indeed, the very notion of energy independence as a protective shield stems from the same vision of markets and international trade that, under the Trump administration, elevated tariffs to the status of the principal instrument of economic policy\u2014a vision according to which commercial flows should respond primarily to political\u2014and military\u2014considerations rather than economic ones. Within this framework, an economy threatened from abroad, if energy self-sufficient, could simply retreat behind its own borders and continue to prosper by relying exclusively on resources extracted from its own subsoil.<\/p>\n

As long as international energy markets remain open, however, and a significant share of oil and gas is transported by sea rather than tied to land-based infrastructure such as pipelines, every country\u2014both buyers and sellers\u2014forms part of a single global market. Decisions about where to sell petroleum products, at what price, and to which ports to dispatch oil tankers and LNG carriers are made by market operators seeking the most profitable opportunities. Consequently, price differences across markets can reflect little more than the transportation costs required to reach their final destination.<\/p>\n

From this perspective, the war in Iran has produced an impact on global energy markets that is both obvious and difficult to avoid: it has removed roughly one-fifth of the world’s supply of crude oil and liquefied natural gas. The disruption of shipping through the Strait of Hormuz\u2014which normally sees the daily transit of around eighty oil supertankers and 160 cargo and container vessels\u2014has interrupted supply flows, while soaring insurance premiums have dramatically increased freight costs throughout the region.<\/p>\n

Initially triggered by the interruption of maritime traffic, the shock progressively spread upstream along the production chain, slowing\u2014and in some cases halting\u2014extraction at oil and gas fields because local storage facilities rapidly reached capacity. This was compounded by reciprocal attacks between Iran and the U.S.-Israeli coalition targeting extraction and refining facilities both in Iran and across the Gulf producing countries, causing damage that could compromise production capacity well beyond the eventual conclusion of hostilities.<\/p>\n

These supply shocks quickly spread through global markets for crude oil, natural gas, and numerous chemical products ranging from helium to fertilizers, producing substantial and persistent increases in prices. The supposed energy independence of the United States therefore proved to be anything but an effective shield. Some observers suggested that the widening gap between the American benchmark price (WTI, West Texas Intermediate) and other international benchmarks such as Brent\u2014relevant for Europe, Africa, and parts of Asia\u2014might also reflect interventions in futures markets by U.S. authorities. Nevertheless, the prevailing trend has remained one of gradual price convergence.<\/p>\n

The Course of Oil<\/strong><\/h3>\n

The consequences, however, extend well beyond prices alone. The sharp decline in the supply of crude oil and natural gas has also altered the destination of exports from the Persian Gulf. The first difficulties emerged in the major Asian markets\u2014India, China, South Korea, and Japan\u2014which traditionally absorb around 80 percent of the region’s energy exports. As supplies became rationed, local operators were forced to turn to alternative international markets, transforming what had initially been a regional imbalance into a chain reaction of global proportions.<\/p>\n

How long these disruptions will persist depends, first, on the evolution of the conflict and, second, on the extent of the damage suffered by the region’s energy industry\u2014two variables that are currently impossible to predict. Perhaps the only forecast one can safely make is that \u201cgreat disorder reigns under heaven,\u201d though without embracing the optimistic conclusion often attributed to Mao Zedong: \u201cthe situation is excellent.\u201d<\/p>\n

From Refineries to the Gas Pump<\/strong><\/h3>\n

What about consumers? Here too, the sudden contraction in crude oil supplies made itself felt with remarkable speed, first and foremost through higher prices for products most directly linked to the oil and gas cycle, such as gasoline. The phenomenon is familiar both to specialists and to anyone who regularly fills up their car: when crude oil prices rise, gasoline prices increase almost immediately; by contrast, when oil prices fall, prices at the pump decline much more slowly. This asymmetric pattern, commonly known as the “rocket and feather” effect, has given rise to several explanations and represents a second important aspect of the current crisis.<\/p>\n

Industry operators often explain the rapid price increases by referring to the replacement cost of inventories. Even if the fuel currently being sold was refined when crude oil prices were lower, every litre sold today must eventually be replaced by crude purchased at today’s higher prices. In other words, what matters is not the historical production cost but the cost of replenishing inventories. This explanation is partly valid, but it does not explain why retail prices fall so much more slowly when crude oil prices suddenly decline, even though replenishing inventories has become less expensive.<\/p>\n

Economists instead interpret the phenomenon by looking at how the retail fuel market operates. Gasoline distribution is highly fragmented and competition is primarily local, taking place among geographically neighbouring service stations. Pricing decisions are therefore interdependent and strongly influenced by expectations regarding competitors’ behaviour. If market participants expect prices to rise rapidly and decline only gradually, retailers will tend to adjust their own pricing accordingly, thereby reinforcing those expectations.<\/p>\n

A further element also comes into play. When prices are falling, consumers are generally less willing to spend time searching for the cheapest service station. As a result, an aggressive pricing strategy based on rapid price reductions becomes less effective in attracting additional customers and therefore less profitable for retailers.<\/p>\n

Moreover, normal market dynamics may be accompanied by forms of collusive coordination among fuel retailers, practices that antitrust authorities\u2014including those in Italy\u2014have repeatedly sanctioned. From this perspective, coordination is relatively straightforward when input costs are rising, whereas managing coordinated price reductions is far more difficult because operators must distinguish between legitimate downward adjustments and opportunistic behaviour that deviates from the collusive arrangement.<\/p>\n

In any event, the divergence between gasoline prices and crude oil prices is mainly a short-term phenomenon. Over longer time horizons, the two tend to converge almost completely.<\/p>\n

In conclusion, the rapid transmission of the oil shock to retail fuel prices observed following the outbreak of the war in Iran confirms well-established market dynamics and suggests that its effects are likely to persist even if the conflict itself comes to an end relatively quickly.<\/p>\n

Gasoline, however, is merely the most visible example. The widespread use of petroleum products\u2014together with the many other goods whose supply has been disrupted by the crisis in the Persian Gulf\u2014means that the shock propagates throughout production chains on a very broad scale. The result is a potentially significant impact on inflation and on the broader economic cycle, with consequences capable of affecting all the world’s major economies.<\/p>\n

 <\/p>\n

Michele Polo is Professor of Political Economy and ENI Chair in Energy Markets at Bocconi University. His research focuses on network industries, competition policy, and regulation. Since its inception, he has also been a contributor to the website lavoce.info.<\/em><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

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