Key Moments
- Commerzbank economists say the current drop in global oil production exceeds any supply shock of the past 50 years, yet price gains remain smaller than in the 1970s.
- Lower oil intensity in developed economies and the use of strategic reserves are cited as key factors limiting the hit to purchasing power and growth.
- The economists still warn that extended disruptions in the Persian Gulf and knock-on supply chain effects could significantly dampen economic activity.
Commerzbank: Severe Supply Disruption, But More Contained Economic Damage
Commerzbank economists Jörg Krämer and Bernd Weidensteiner argue that, although the current disruption to global crude supply is more pronounced than during the major oil shocks of the 1970s, the macroeconomic fallout for advanced economies should be less severe this time. They point to smaller oil price increases, reduced dependence on oil, and the presence of strategic reserves as important stabilizing factors. At the same time, they caution that continued damage to energy infrastructure in the Gulf region and related supply chain problems could still weigh heavily on growth.
Historic Decline in Output Amid Gulf Disruptions
The economists describe the current supply shock as unprecedented in recent decades, driven by the blockade of the Strait of Hormuz and attacks on production and loading facilities in the Persian Gulf.
“In fact, oil production has fallen more sharply due to the blockade of the Strait of Hormuz and attacks on oil production and loading facilities in the Persian Gulf region than during any other oil crisis of the past 50 years. According to the IEA, daily crude oil production has likely fallen by at least 10 million barrels since the start of the Iran War. This amounts to approximately 12% of global oil production.”
Price Response Weaker Than in the 1970s
Despite the sharper contraction in output, Krämer and Weidensteiner note that the price response in the current episode has been far less extreme than during the oil crises of 1973–74 and 1978–79.
“Despite the sharper decline in oil production during the current crisis, prices have risen significantly less than in 1973–74 and 1978–79. For example, the annual average oil price in 1974 was 250% higher than in 1973, and in 1979 a barrel of crude oil was still about 125% more expensive than the previous year’s average. This year, however, even under pessimistic assumptions for the coming months, the price is likely to be at most 60% higher than the previous year’s average.”
| Period / Scenario | Change in Annual Average Oil Price vs Previous Year |
|---|---|
| 1974 | 250% higher |
| 1979 | 125% higher |
| Current year (pessimistic assumption) | At most 60% higher |
Lower Oil Intensity Restrains the Hit to GDP
The economists stress that structural changes in advanced economies over the past five decades have reduced vulnerability to oil shocks. They highlight that oil consumption in developed countries has declined even as output has expanded, curbing the overall loss of purchasing power.
“Furthermore, since oil consumption in developed countries has declined over the past 50 years despite rising economic output, the current loss of purchasing power is likely to be significantly smaller than it was during the first oil crisis. For instance, the first oil crisis caused Germany’s oil bill to rise by 2.5% of gross domestic product, while in Japan the increase amounted to nearly 4% of GDP. Currently, however, for the four countries we are examining, an annual average oil price increase of $40 per barrel is projected to result in an increase in the oil bill of between 0.5% and 1% of GDP.”
| Country / Scenario | Increase in Oil Bill as % of GDP |
|---|---|
| Germany – first oil crisis | 2.5% |
| Japan – first oil crisis | Nearly 4% |
| Four-country sample – current $40 per barrel increase (projected) | Between 0.5% and 1% |
Outlook: Impact Seen Below First Oil Crisis, But Risks Persist
Summarizing their assessment, Krämer and Weidensteiner conclude that the macroeconomic consequences of the current energy shock should remain below those of the first major oil crisis, but they do not see grounds for complacency.
“Our analysis of the energy market suggests that the consequences of the current energy crisis are unlikely to match the impact of the first oil crisis of 1973–74. However, it still seems too early to sound the all-clear.”
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