Publications: Notes at the Margin

A Coming Economic Disaster (March 30, 2026)

 

This energy crisis differs from earlier ones in four critical ways. First, the magnitude of the lost oil and LNG supplies appears to be larger than in other crises and, due to the Iranian attacks on Gulf energy infrastructure, longer-lasting. Most informed observers believe the lost supply will lead to an extended period of higher oil and gas prices.

 

Oil and LNG producers in the United States stand to benefit from the loss of supply. Crude oil and LNG prices will be pushed higher, perhaps much higher, when measured in US dollars. Most observers have also noted the likelihood of these increases.

 

The rise in the dollar price of oil and LNG creates a third and, to this point, unacknowledged threat to the world economy because the US dollar just happens to be the world’s reserve currency. The dollar’s exchange rate will rise as LNG and crude oil prices rise, absent intervention by the US Treasury or the Federal Reserve. The strengthening dollar will impose greater strain on the economies of countries that must import oil and gas. It will also place increased strain on the non-energy sectors of the US economy.

 

The extraordinarily uneven geographic impact of the supply cuts resulting from the attacks on facilities in the Persian Gulf and the closure of the Strait of Hormuz further distinguishes this disruption from previous episodes. Nations accounting for one-third of global oil use have seen no impact on their oil supply, leaving the countries consuming the remaining volumes to bear most of the shortfall burden. The impacts are similar for natural gas. For oil, one-sixth of projected consumption has been affected, with over half of the nations involved located in Asia.

 

Together, these four characteristics lead to a single conclusion: in this crisis, the price elasticity of consumption for global consumers is much higher than previously estimated. Quite simply, oil and LNG consumption will drop much more rapidly than most studies project. The decline will occur because the real prices of petroleum products and natural gas in many nations will increase by unheard-of magnitudes as the dollar’s value surges.

 

A serious global recession could follow if these factors are not addressed quickly.

 

To receive the full report along with future issues of Notes at the Margin, please Contact Us or send us an Information Request for subscription information.