Publications: Notes at the Margin

The Wolf Returns: Diesel Supplies, Environmental Regulations, and the Coming Recession (May 9, 2022)

 

In April 1973, Foreign Affairs published an article by James Aikens titled, “The Oil Crisis: This Time the Wolf Is Here.”[1] Aikens served as the US ambassador to Saudi Arabia from September 1973 to 1976. Many of us viewed him as the Saudi ambassador to the United States because he aggressively supported higher oil prices and agendas pushed by Middle Eastern oil exporters.

 

Many in 1973 agreed with Aiken’s warning that oil could be used as a political weapon. Many also concurred with his view that world reserves were limited. Aikens called for consuming nations to move on numerous fronts to avoid situations that would require, in his words, “highly dangerous actions.”

 

Aikens was correct in this respect even as various experts rightly criticized his flawed analysis. Price rose, as he predicted. Middle Eastern countries became very rich, as he predicted.

 

Here, we focus not on crude oil or 1973 but on diesel fuel. In our view, the wolf has returned. Supplies of the fuel critical to transportation and production of most agricultural goods will be insufficient absent environmental rules being relaxed. The latter is unlikely. Instead, diesel prices will rise higher and higher. The price increases will cut farming output. The first losers will be emerging market economies, whose citizens will see the cost of critical foodstuffs balloon. While starvation may be avoided, famine will be widespread.

 

This outcome could be avoided if key environmental rules were loosened. For example, lifting or lightening the International Maritime Organization’s low-sulfur fuel requirement for ships would increase diesel availability and reduce the upward price pressure.

 

The IMO regulation will not be changed. Environmental regulators such as IMO Secretary-General Kitack Lim consistently refuse to recognize or acknowledge the adverse consequences of their actions. Thus, thousands and maybe even millions may be sacrificed on Lim’s hardline altar.

 

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.