It is now over six months since the U.S. and Israel first bombed Iran and began a war which led to the closure of the Strait of Hormuz, stopping the transport of oil and other important products. Anyone who drives knows one of the primary consequences has been the significant rise in the cost of gas, diesel and petrochemical products in both countries. Indeed, the continuing high fuel costs has now begun to show up in recent inflation figures. After all, we all know these additional costs are simply passed on to consumers, be they related to manufacturing, transportation or agriculture. Indeed, the “affordability” issue is now number one in a long line of economic issues affecting the Trump administration as Republicans ride into the upcoming mid-terms.
In addition, the Iran war has now been expanded throughout the Middle East region, further exasperating the problem of global fossil fuel shortages. The war is also being carried out by Iran’s proxies, including the Houthis in Yemen and Shiite militias in Iraq. Very recently, another far longer route to Asia through the Suez Canal and the Mediterranean came under threat as drones hit tankers in Egypt — opening up a whole new front. Reportedly, Revolutionary Guards commanders have also been deployed by Iran to serve directly on Hezbollah’s leadership council in Lebanon. As a result of Iran’s proxy attacks throughout the region, many Middle East states have been directly affected including Saudi Arabia, Qatar, Kuwait, Iraq, the United Arab Emirates, Jordon, and even Egypt. Iran’s bombing of Gulf energy facilities has caused oil prices to spike to their highest level since the war began, making it clear that increased escalation would lead to further economic costs for both the U.S. and Canada.
Most recently there have been cyberattacks on U.S. water systems, initially in Michigan and Minnesota. Officials and experts have warned that there is evidence the attacks have grown to include at least seven states and may be far wider in scope. As American authorities race to safeguard the nation’s water supply against such assaults, it is reported that the attacks increasingly appear to be the work of Iranian hackers. To date, Canada has been spared such attacks on its critical infrastructure. The use of cyber warfare is extremely alarming given the extent to which critical infrastructure depends on computers and internet connections. Indeed, in a recent advisory, the U.S. Cybersecurity and Infrastructure Security Agency said the hackers were “targeting water entities of all sizes” and recommended facilities unplug vulnerable controllers from the internet. The agency has for months been warning the public that Iran may seek to compromise water and wastewater utilities and other critical infrastructure, including government services and facilities and energy sectors. Such hacking ability means that potentially any facility using vulnerable internet-connected operational systems is at risk. In addition, such potential attacks means that increased security and remedial measures taken to secure operational systems will prove to be very costly for many public and private organizations.
While both the U.S and Canada are not dependent on oil and gas from the Gulf states, the global nature of the industry means that the higher prices will remain in North America as long as the war continues and the Strait of Hormuz is closed. Indeed, the consequences of the war will continue to be felt for months ahead and possibly years. In light of Iran’s attacks on the Gulf states’ energy infrastructures, one cannot just flip a switch and expect pre-war amounts of oil to flow overnight. For this reason, both Canada and the U.S. will be faced with higher fuel costs for some time to come, especially since domestic oil and gas production is already at their maximum levels. Despite the fact that both countries are energy independent, global oil and gas production and its markets will continue to directly influence domestic prices and contribute to inflationary pressures.
FROLITICKS 