NO GAS LINES... YET

Got vacation plans this summer?  Better stay flexible as the war with Iran is going to make travel this summer more expensive and unpredictable.

Even when the war is declared “over” there is such a backlog of shipping in the Mideast that supply chains will be disrupted for many months.  We’re not just talking about gasoline but dozens of other chemicals the world’s manufacturers are dependent on.  The impact of this will affect us all.

Roughly 2,000 ships are reportedly delayed, anchored or awaiting clearance across the Persian Gulf region. Their cargoes are going to face months of delays heading for China, India and Japan when they can resume travel.  Not only will prices for their cargoes soar, but so too will the cost of the products those cargoes are used to manufacture… plastics, electronics, fertilizers and pharmaceuticals.

The Oil Crisis of 1973

So far oil supplies are at a deficit (lower than they should be) but are not seeing real shortages:  no “gas lines”…. Yet.

If you’re planning a European vacation this summer, double check.  Because jet fuel prices have nearly doubled since the war began Lufthansa has already cancelled 20,000 flights this summer.

Flights are being consolidated even as fares are hit with fuel surcharges.  Older, less fuel-efficient aircraft like the Boeing 767 are increasingly being replaced by newer jets such as the Airbus A350.  Some analysts have warned that Europe could face critically tight jet fuel supplies within a few weeks if disruptions continue.

Trans-Atlantic flights out of New York City will continue, albeit it at higher costs for travelers.

And remember;  summer tourism affects more than just the passengers.  If they can’t travel, tourism dollars they would spend on both sides of the Atlantic will plummet.  European tourism officials were counting on free-spending American visitors this summer.  Instead they may get cancellations and angry customers staring at airfare apps. 

Even if you’re not flying to Europe, domestic road trips will be affected.

As of last Friday, AAA says the average price for gas in Connecticut was as high as $4.66 and diesel was $5.84.  Experts say that an end to the war may see an immediate price dip at the pump for gas but not for diesel.  High diesel costs mean higher prices for everything we buy.  And it may be 2027 before prices return to pre-war levels. 

Remember the supply chain disruptions after COVID?  They may be the new normal.  Take pharmaceuticals, for example.

America is hugely dependent on India and China for the pills we take.  Certain cancer drugs and vaccines, may be especially vulnerable to shipping disruptions.  Pain killers, antibiotics and anesthetics could be in short supply.  Even generic drugs (which make up 90% of those sold in the US) will be affected.

The world economy now runs on floating warehouses, fragile supply chains and optimistic assumptions.  One conflict half a world away can raise the price of gasoline in Connecticut, disrupt vacations in Europe and threaten the supply of medicines in your local pharmacy.  

We built a global economy based on speed, low cost and “just in time” delivery.  But “just in time” just isn’t anymore.