Kamal Ghorui
Whether Trump’s war on Iran is over or paused, it hasn’t stopped affecting ordinary people’s lives. Americans are paying $4.4 per gallon of petrol, up from $2.9 in Feb. The increase is enough to derail budgets of poorer households. And now, for the first time in 25 years, a US airline has shut down, unable to balance its books after jet fuel doubled in price. Spirit Airlines was no ordinary carrier. It filled a disappearing niche as an ultra-low-cost airline. Reports say a family trip on Spirit cost up to $1,000 less than on major US airlines. For many, it was the difference between travelling and staying put. Why did Spirit perish? Because it could not raise fares – its typical customer does not have the purchasing power.
Many businesses across the world are in the same predicament, if not crisis. Just last week, India raised commercial LPG prices by 48%. LPG fuels not only kitchens but also factories making ceramics and many other things. If a ceramic factory has to choose between making economy and premium sinks amid the ongoing supply crunch, it will obviously choose the latter, because margins are higher, and premium buyers have more elastic budgets. On the other hand, for poorer customers, even necessities like food can become unaffordable. There are so many stories of migrant workers packing up and leaving, because gas to cook food has become unaffordable.
That’s a key difference between US and Asia, and even Europe, right now. US is hurting from a price shock, but there’s no supply crunch. In fact, US natural gas prices are at a 17-month low due to oversupply. But India, say, has been buffeted by both high price and tight supply. International Energy Agency last month warned of a possible “demand destruction” due to this condition. Last week, the CEO of a major fertiliser producer said the current fertiliser shortage could take 10bn meals off the table every week. Again, the people going hungry will be the world’s poor. So, it’s meaningless to argue – as Trump has – that “hostilities terminated” on April 7, when blockade of Hormuz continues to take a toll on ordinary people’s lives. The collapse of a poor man’s airline may not ruffle Trump, but he can’t be blind to Hormuz’s effect on AI: higher energy and chip prices could bite America’s hyperscalers, who make up 45% of S&P 500’s market cap.
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