Anyone looking at your heating bills in the coming months will be painfully aware that the price of gas has skyrocketed; in fact, throughout 2021 it has multiplied by more than four. In frenzied trading last week, it was up more than 20% a day. There are many explanations for this. Renewable energy sources, an important part of the mix, have not generated as much energy as expected. Mass stimulus programs and the recovery from the pandemic have led to increased demand. However, the important thing is this: the energy market had not seen such dramatic price rises since the “oil crises” of the 1970s, when the OPEC producer cartel discovered that it could keep the developed world in check by activating and deactivating the supply. The results that time were dramatic. An era of “stagflation” began, combining a rapid rise in prices and stagnant growth. He moved the center of world power to the Middle East. And the turmoil it unleashed destroyed governments on both sides of the Atlantic.

It is true that this time it will not be so dramatic. We use much less energy as a percentage of GDP than 50 years ago. It represents around 4%, up from a peak of 11% in the 1970s. Services are much more important than they used to be, and we are much more energy efficient, while all the investment in green energy means that at least we have alternatives that grow in importance, even if they cannot replace natural gas yet. Still, that doesn’t mean that huge increases in energy prices don’t matter. In reality, they will affect the economy in three significant ways.

First, will slow growth. Rising energy prices will absorb the domestic demand of all major economies. It does not matter if it is higher costs for the industry or higher prices for consumers. In any case, people will have less money to spend on other things and that will affect everyone. It is true that some of that money will be recycled, as energy exporting nations will be able to buy more. But we have a lot of evidence from previous raw material cycles that tells us that the process is often neither smooth nor exact. Much demand will be lost and all major economies will struggle, And worst of all, it will come at a time when they are still beginning to recover from the pandemic.

Next, an industrial recession is expected. Rising energy prices are a pain for consumers, but it can be absorbed for the most part by cutting some costs elsewhere. For many energy intensive industries it can be catastrophic. If the cost cannot be passed on to consumers, and if there are substitute products, or the product is not essential, the company that makes it will be in real trouble. Industries such as chemicals, building materials, paper, glass, and food production can experience a widespread shutdown. The more a country depends on the industry, the more it will be affected (most services do not use much energy), so in Europe you can expect that Germany and Italy are the most affected countries. Of course, the impact will vary. Poland, for example, an increasingly important part of the European manufacturing base, uses mainly domestically produced coal rather than imported gas (more than 70% of Polish electricity comes from coal). The result?: Polish factories will be even more competitive than their German rivals. In general, however, it will hit the countries that depend on manufacturing the hardest, with the hardest hit being those that depend on factories that run on imported gas.

Finally, it is to be expected that important geopolitical changes will take place. After the oil crisis of the 1970s, all OPEC countries, and especially those in the Middle East, became much more demanding. They had a lot of money, and money always translates into power. This time it will be no different. We are already seeing that Russia, which is no stranger to the politics of the great powers, is demanding more in exchange for increasing its production. It is the world’s largest gas exporter by a wide margin, and it is already benefiting from it. The Moscow stock market has risen 60% in the last year, reaching an all-time high. We can expect to see a much richer Russia and much more present as a global power throughout the world. (And that was already quite aggressive in this area). In the same way, Qatar is also a big gas exporter, so forget about any western country organizing a boycott of the World Cup next year. alleging that the Qatari government provides inhumane treatment to the immigrants it employs in its public works. It’s not going to happen. Countries that have gas to export will achieve a much stronger position politically.

The “gas crisis” will not be as important as the oil crisis. We do not depend on it in the same way that we depended on oil fifty years ago. There is no producer cartel as aggressive as OPEC was at the time of greatest influence, and there is a much broader range of alternative energy sources and suppliers. Still, that doesn’t mean it’s not going to be meaningful. The economy is much more dependent on gas than we think, and the increase in the price is going to change the world economy considerably.