President Donald Trump has left America’s economy far worse off than it had been as a result of his war against Iran, according to a number of experts.
“American consumers have started to feel their budgets squeezed beyond gas prices from the U.S.-Israeli war in Iran, as energy costs have begun to pressure shipping, transportation, agriculture and airline prices,” wrote The Washington Post’s Rachel Lerman. “With President Donald Trump on Tuesday announcing a suspension of U.S. attacks on Iran for two weeks, the big question is: When will prices come down?”
Lerman went on to review the various economic sectors negatively affected by the Iran war. While gas prices dipped in the immediate news of Trump’s ceasefire, “gas prices could take months to fall significantly,” Lerman reported. While gas prices may somewhat ease over time if the ceasefire holds, “significant energy price relief will depend on negotiations progressing and resumed normal levels of shipping through the Strait of Hormuz.” Because Trump’s ceasefire with Iran left them in control of the Strait of Hormuz, that is hardly a given.
“The terms of the truce highlight how Iran has used control of the Strait of Hormuz to gain enormous leverage over the global economy,” said CNN's Hanna Ziady on Wednesday. “That the ceasefire is conditional on Iran agreeing to reopen the vital waterway is a tacit acknowledgement of Tehran’s influence over the world’s most important oil chokepoint – and, with it, significant chunks of the global economy.”
The negative economic impact is not limited to gas prices, Lerman pointed out.
“Several airlines including Southwest, United, JetBlue and Delta have raised their checked baggage fees in recent weeks in response to the spikes,” Lerman wrote. “Delta, Southwest and United increased their fees by $10 for the first and second checked bag, and JetBlue bumped up its fee between $4 and $9.”
She added, “Amazon added a 3.5 percent fuel and logistics surcharge for third-party sellers, and the U.S. Postal Service said it would impose an 8 percent fee on some package shipments. Diesel prices are up more than $2 per gallon from a year ago, hitting a national average of nearly $5.67 early Wednesday. UPS and FedEx have surcharges that adjust regularly in response to fuel costs, and prices have gone up, hitting a broad array of business clients who pass those costs along to consumers, as well as Americans shipping packages directly.”
Even food prices are going to be adversely impacted by the Iran war.
“Food prices at the retail end are a little bit more buffered,” Ortega, a food economist and professor at Michigan State University, told Lerman. “That doesn’t mean we aren’t going to feel the effect, there’s just a lag.”
AlterNet reached out to Dr. Ed Gresser, Vice President and Director for Trade and Global Markets at the Progressive Policy Institute. When Gresser previously told Alternet that Trump’s war would raise gas prices, White House spokesperson Kush Desai replied to AlterNet that Gresser was an “idiot.” This time, Desai gave AlterNet comments independent of Gresser's observations.
“President Trump has been clear about short-term disruptions as a result of Operation Epic Fury, and the Administration went into this military engagement with a plan to mitigate these disruptions to America’s long-term economic resurgence," Desai told AlterNet. "As energy markets begin to stabilize, historic tax refund checks hit the mail, and the rest of the Trump administration’s pro-growth agenda continues taking effect, Americans can rest assured that the best is yet to come.”
Gresser offered a contrasting perspective.
“I would guess that yes, destruction of Iranian (and some other) energy facilities in the Persian Gulf area will have at least a medium-term effect keeping prices for crude oil and chemical fertilizer high, and that in turn means gasoline prices may come down only slowly,” Gresser told AlterNet. “Same for other petroleum-based products such as plastics, skin creams, and so on. The high potential of conflict also adds risk premiums to shipping and other costs.”
He added, “Longer-term, lots of open questions. One is whether the administration will really concede that Iran has a right to close the Strait of Hormuz and assess tolls on shipping passing through it. That would make the smaller Gulf monarchies and to some extent Iraq reliant on Iranian good will for all of their exports. Likewise, Asian countries are the main buyers of Persian Gulf energy, and their supplies would be much less secure.”
Dr. Robert Shapiro, who served as a top economic adviser to President Bill Clinton, argued that the future of gas prices depends on the nature of the agreement that ends the war — assuming that such an agreement is even reached.
“Even if hostilities do not restart, the price of oil will not return to pre-Trump levels because there’s a new risk premium that they could restart at any time, increasing tanker insurance costs for example, and because oil infrastructure has been degraded, reducing supply for some time,” Shapiro explained to AlterNet. “An Iran-controlled toll to use the Strait will produce big bucks for Iran, but its impact on world prices for oil, natural gas, helium, etc. should be minimal. Another source of economic friction will be the now-intense uncertainty about what the Trump administration will do next—in the Mideast and in scores of policies at home; and uncertainty dampens investment.”
He concluded, “As it is, the economy was weakening before this crisis began, and these and other factors will exacerbate those downward pressures. A resolution over the next two weeks will not stop the deterioration in economic conditions.”
Speaking to AlterNet about Trump's economic policies and the Iran war, White House spokeswoman Taylor Rogers said that “the United States’ energy dominance status, as the world’s leading producer and a top exporter of oil and natural gas, has positioned us to not rely on the free flow of oil through the Strait of Hormuz like other countries. If anything, Operation Epic Fury actually underscored the importance of producing reliable, affordable, and secure energy here at home. Many of our allies that have tried transitioning to intermittent and unreliable renewable energy sources have predictably failed to break their reliance on foreign oil that goes through the Strait."
She added, "Several countries from around the world are now looking to emulate the President’s energy dominance agenda and are advancing new partnerships that enhance their energy security with the United States.”
