Greg Sargent typically does some of the best political interviews around and this one is no exception. He speaks with Paul Krugman about the box Trump has gotten himself in in Iran. It’s fascinating:
[E]conomist Paul Krugman lays out an expansive case that Donald Trump holds a losing hand in the war with Iran. Krugman also argues that Trump can’t seem to admit that the Strait of Hormuz problem has cornered him. Krugman also details why the situation could get worse, if Iran continues holding out and constraints on oil supply drive the global economy into recession. As Krugman puts it, this will keep getting uglier for Trump until he “swallows his pride” and accepts that he doesn’t hold the cards. This builds on the piece Krugman posted on his Substack arguing that time is on Iran’s side. Meanwhile, gas prices just hit a new high and Republicans quietly fear they’re in deep trouble in the midterms due to what Trump has unleashed. Krugman takes us through these dynamics, notes that Trump is obsessing over his ballroom in search of a win, and explains why this all could tailspin further for the GOP.
…if this continues, he ain’t seen nothing yet. Because the really interesting thing—I cited some numbers from Goldman Sachs in the Substack—although the price of oil is way up, consumption of oil is only down a little bit. And mostly what’s happening is that they’re drawing down inventories of oil, that people who have oil in storage tanks, with oil that was already on tankers, is being used up, which is all happening out of the belief that the strait will reopen soon and prices will come down.
As people start to realize that that’s not about to happen—which has been happening just over the past couple of days—then the prices have to go much, much higher.
Basically, the price of oil has to go high enough to inflict enough economic damage—we have to somehow or other stop, reduce the consumption of oil by another 11 million barrels a day. Convenient thing is that right now, world oil consumption is about 100 million a day. So that’s also about 11 percent. And it takes a huge price increase to do that.
It’s not easy to wean yourself off oil, in the matter of weeks, which is what we’re kind of expecting has to happen. So this can get much—it’s ugly already. It’s ugly politically, obviously, for Trump and the Republicans to have gas hitting its highest level in four years. But it’s going to get a lot uglier very soon unless Trump swallows his pride and accepts that he actually lost this war.