'Yes, the similarities of oil plus rising rates plus inflation and slowing economic growth are undeniable. But the world today is as different from the early 1970s as the early 1970s was from the early 1920s'
That economic retaliation is likely to plunge Russia into a severe economic depression that could erase 25% of its GDP, but the Russian economy is not a major global force. Its GDP is thein the world, with most of that concentrated in oil production, which makes it barely the size of Texas with five times the population.
Vehicles line up for gasoline at service station during gas shortages, May 3, 1979 in Long Beach, California.In the 1970s, however, OPEC controlled nearly 60% of the world oil supply, compared to Russia’s 10% today, and the 1973 embargoin a few weeks, compared to the 25% increase now in the weeks since the Ukraine invasion. The energy shock in 1973-1974, followed by subsequent supply shocks in the subsequent years, was by orders of magnitude greater than Russia today represents.
While Western economic sanctions against Russia will have a devastating impact on the Russian economy, even the complete removal of Russian commodities would not have anywhere near the global impact of the OPEC embargo in the 1970s. Markets that trade these commodities are understandably volatile in the face of the sudden disruptions combined with lack of clarity about duration and extent, but that will likely fade as the world adjusts to the removal of several million barrels of oil a day from Russia . It will take longer for global markets to compensate for the loss of Russian nickel, wheat and natural gas, but if the past four weeks are a guide, the negative effects are proving less than feared.
The intensity of inflation has rattled many, but even today’s elevated levels are mild compared to the stagflation years. Inflation from
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