Wall Street is still treating the oil shock from Washington’s war on Iran as temporary. Oil prices are up. Analysts are warning about inflation. Investors are betting the disruption will pass.
That misses the real danger.
The first problem is the price of oil. The deeper danger is what high oil prices do to production.
Oil and gas do not just fuel cars, ships and power plants. They are built into nearly every part of modern production. Natural gas goes into fertilizer. Naphtha, made from oil, goes into plastics and synthetic materials. Helium, produced largely through natural gas processing, is essential for MRI machines and is used in semiconductor production.
When the Strait of Hormuz closes and these supplies tighten, the price spike comes first. The production crisis follows.
Companies that depend on oil, gas, fertilizer, plastics and petrochemicals are being hit with higher costs. If they cannot sell their goods at a profit, they cut back. That means fewer shifts, shorter hours and layoffs.
That is how an oil shock feeds a capitalist crisis.
When companies produce more than they can sell profitably, they cancel orders, let inventories pile up, idle equipment and cut jobs.
That is capitalist overproduction. There is not too much food, fuel, housing, medicine or transportation for people’s needs. There is too much for the bosses to sell at the profit they demand.
The oil spike worsens that problem. It raises the cost of fertilizer, plastics, petrochemicals, transport and fuel. It squeezes profits in industries already stretched by debt and speculation. It does not create the capitalist crisis by itself. It pushes an already strained economy closer to the breaking point.
That is why this cannot be reduced to an inflation story. Prices may stay high even as production falls and workers lose jobs. The deeper danger is not just what shows up in the price index. It is that farms, factories, truckers, airlines and hospitals cannot keep running profitably under the pressure of war-driven costs and broken supply chains.
Fertilizer, plastics, helium and naphtha are not side issues. They are tied to food production, medical care, manufacturing, shipping, packaging and technology. Disrupting them together, through Washington’s war on Iran and the resulting closure of Hormuz, does not just make goods more expensive. It makes some goods harder to produce at all. That hits workers first and hardest.
The banks are protected. They can still make money from debt, stocks and speculation while factories cut shifts and workers lose pay. The Treasury can arrange swap lines — credit lines between governments — to keep Gulf states from dumping U.S. bonds. When banks and markets are in trouble, the Federal Reserve can cut interest rates and rush money to the banks.
But no central bank can create fertilizer, fuel, food or profitable production by decree.
None of it reaches the worker facing a higher grocery bill, a shorter shift or a shuttered fertilizer plant. None of it stops the production breakdown set off by Washington’s war.
The closure of the Strait of Hormuz did not come from nowhere. Washington chose the war. Workers are getting the bill — in higher prices, shorter hours, layoffs and production breakdowns.
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