A third inflationary shock in less than a decade is coming: who will pay the price this time around?

## Summary
Illustration: Sebastien Thibault/The Guardian View image in fullscreen Illustration: Sebastien Thibault/The Guardian A third inflationary shock in less than a decade is coming: who will pay the price this time around? Aditya Chakrabortty Brutal past experience has taught us that a cost of living crisis doesn’t affect us all the same, because we don’t all go into it with the same income or wealth P erhaps the most celebrated writer on oil markets is Daniel Yergin. Fifteen years ago, before the US and Israel started their war on Iran, killing thousands of civilians in the process, before the strait of Hormuz became as infamous as the Bermuda Triangle, and before experts declared “the greatest global energy security threat in history”, Yergin published The Quest : Energy, Security and the Remaking of the Modern World. Explore more on these topics UK cost of living crisis Opinion Inflation Donald Trump Keir Starmer Rachel Reeves Strait of Hormuz US-Israel war on Iran comment Share Reuse this content

## Article Content
Illustration: Sebastien Thibault/The Guardian
View image in fullscreen
Illustration: Sebastien Thibault/The Guardian
A third inflationary shock in less than a decade is coming: who will pay the price this time around?
Aditya Chakrabortty
Brutal past experience has taught us that a cost of living crisis doesn’t affect us all the same, because we don’t all go into it with the same income or wealth
P
erhaps the most celebrated writer on oil markets is Daniel Yergin. His work has won a Pulitzer and his advice sought by every president from Bill Clinton to
Donald Trump
. Let’s start by looking at an example.
Fifteen years ago, before the US and Israel started their war on Iran, killing thousands of civilians in the process,
before the strait of Hormuz became as infamous as the Bermuda Triangle, and before experts declared “the greatest global energy security threat in history”, Yergin
published The Quest
: Energy, Security and the Remaking of the Modern World. After hearing Trump announce a “very soon” end to the conflict for the second – or was it the third? – time, I dug out my copy. Just as I remembered, it devotes a chapter to the Persian Gulf.
As far back as 2011, Yergin was anxious about the strait of Hormuz, which he calls “the number one choke point for global oil supplies”. Both oil buyers and oil sellers know how swiftly
Iran
could shut this narrow thoroughfare. A general in Tehran warns: “Enemies know that we are easily able to block the strait for an unlimited period.” Even before the spread of drones, the Islamic Revolutionary Guard Corps had the firepower to reconfigure Gulf geography. A leader of an Arab Emirate calculates his country is only “46 seconds from Iran as measured by the flight time of a ballistic missile”.
I do not offer this passage as some great feat of prediction, but quite the opposite. Yergin was simply putting together what was threatened in public, known to diligent observers and produced in government war games: use military force on Tehran and it will respond by inflicting economic agony. That simple truth was glaringly obvious, yet still Trump ignored it. The past month can be summarised as a big orange man steps on a rake – and wonders how he got a black eye.
But now Washington’s supreme leader has provoked the chokehold of
20% of global oil supplies
, the rest of the world will suffer the fallout. For a taste of what’s coming our way, look at Asia, which typically buys
80% of the oil
transported through the strait of Hormuz. Countries across the region have been hit first and hit hard. Governments are fighting to save energy by
imposing limits on driving
and shortening the working week. Populations are struggling with dramatic hikes in food prices and shortages of petrol and diesel. In Bangladesh, the government reportedly
believes it will run out of oil and gas
within weeks. To conserve fuel, some temples in Thailand
have stopped cremations
. Barely a month since the start of this war, already the most populous continent has been plunged into chaos.
This is what a fossil-fuel shock looks like. The UK must adapt its energy system – and quickly | Chaitanya Kumar
Read more
The energy-supply storm may well hit our shores just before next month’s elections. No wonder Keir Starmer is calling Cobra meetings, while
Rachel Reeves
summons business leaders into Downing Street. For now, this is all words and photos and performance, but the electoral repercussions ensure we’ll soon get deeds. Starmer was already facing a May wipeout, but he surely understands how rising prices will add to his losses. After all, he owes the 2024 landslide to an unholy combination of Vladimir Putin, for pushing up prices, and Liz Truss, for pushing up interest rates. The prime minister who promised that in 2026 the country would turn a corner now faces both prices and rates rising, followed by a slump.
So what should he do? Let me take a leaf out of Yergin’s book and state three truths that many MPs and analysts should already know but may be tempted to forget.
First, we’re not all in it together. A cost of living crisis doesn’t affect us all the same, because we don’t all go into it with the same income or wealth. This is shaping up to be the third national crisis in just over half a decade, and just as with Covid and the Ukraine shock, there will be invocations of pulling together and public spirit.
Yet for those with the right job and house, their experience of Covid was far more tolerable than that of a large family squeezed into a small flat and relying for a wage on driving an Uber or nursing sick people. For some, the pandemic meant banana bread and lots of Duolingo; for others, it meant facing the daily risk of contracting serious illness.
In the same way, the inflationary shock of 2022-23 affected British households in sharply different ways, as is illustrated by a
new study from researchers
in the
Foundational Economy
group. Between 2019 and 2023, the lowest-earning 20% of households had to sp

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## Expert Analysis

### Merits
- The highest-earning 20% actually spent 45% less: they got the benefit of Truss’s energy-price guarantee, traded down from Waitrose to Aldi and cut back on luxuries.
- Two years ago, Starmer won an election promising “ the highest sustained growth in the G7 ”.

### Areas for Consideration
- Fifteen years ago, before the US and Israel started their war on Iran, killing thousands of civilians in the process, before the strait of Hormuz became as infamous as the Bermuda Triangle, and before experts declared “the greatest global energy security threat in history”, Yergin published The Quest : Energy, Security and the Remaking of the Modern World.
- For some, the pandemic meant banana bread and lots of Duolingo; for others, it meant facing the daily risk of contracting serious illness.

### Implications
- Illustration: Sebastien Thibault/The Guardian View image in fullscreen Illustration: Sebastien Thibault/The Guardian A third inflationary shock in less than a decade is coming: who will pay the price this time around?
- Aditya Chakrabortty Brutal past experience has taught us that a cost of living crisis doesn’t affect us all the same, because we don’t all go into it with the same income or wealth P erhaps the most celebrated writer on oil markets is Daniel Yergin.
- Both oil buyers and oil sellers know how swiftly Iran could shut this narrow thoroughfare.
- Yergin was simply putting together what was threatened in public, known to diligent observers and produced in government war games: use military force on Tehran and it will respond by inflicting economic agony.

### Expert Commentary
This article covers energy, oil, food topics. Notable strengths include discussion of energy. Areas of concern are also raised. Readability: Flesch-Kincaid grade 0.0. Word count: 1454.