The war in Iran is the worst-case scenario for the entire world, according to a Nobel Prize winner, highlighting a worrying economic development.
Paul Krugman believes the strikes carried out by Donald Trump's administration on the Middle Eastern country will have consequences the world over. Not only will the bombing, which has killed 500 civilians as well as Ayatollah Ali Khamenei, strain relations with the West and Middle East, but the rising energy price is looming and may cause real trouble in the long-term.
Krugman wrote, "But now we know that there is another reason for nations to reduce their dependence on fossil fuels: security. In a dangerous world, it’s infinitely safer to rely on the sun and the wind than to depend on fossil fuels that must be transported long distances, from nations that are untrustworthy, often exploitative and located in regions that frequently devolve into war zones.
"The current situation in the Middle East is essentially the worst-case scenario for world energy supplies. Normally around 20 percent of the world’s oil supply transits through the Strait of Hormuz.
"It’s also a crucial route for shipment of liquefied natural gas and fertilizer. That passage is now effectively closed and there are no good alternatives."
Krugman went on to say the claim Trump made regarding the re-opening of the Strait of Hormuz is unachievable, and will lead to further problems in the Middle East, and therefore the world.
"Donald Trump may say that he will reopen the strait," Trump wrote. "But short of regime change in Iran, it’s very hard to see how he can. Oil tankers are extremely vulnerable targets while drones, anti-ship missiles and mines are cheap. Moreover, the Iranian regime surely still has thousands of them in stock, in readiness for an attack just like this.
"While we are in the midst of a worsening crisis, many – including myself – are surprised that oil prices haven’t risen even more than they have, although they took another leg up yesterday. I guess speculators still expect the disruption to end quickly. Why is anyone’s guess. However, consumers across the world are already feeling the effects.
"While it is surprising that crude oil prices haven’t increased more, it’s also surprising how quickly retail gasoline prices have surged."
The economist also suggested the war with Iran could prompt other countries to pursue renewable energy sources, something Trump had attempted to dismantle in the past.
Krugman wrote, "I’d add that the problem with U.S. demands that nations burn, baby, burn isn’t just American adventurism. It’s also the fact that relying on the United States for LNG, which is what doing things Trump’s way would amount to, is itself unsafe.
"Are you sure that Trump or a Trump-like future president won’t cut off energy supplies to nations that annoy him? I’m not.
"So the U.S. war against Iran is making a strong case for nations around the world to seek energy independence. And for those nations that don’t have large fossil fuel reserves, that means wind and solar (and, yes, nuclear.)"
