Spare us the theatrics: An oil shock should prompt macro responses, not gimmicks

We have been here before. In the 1970s, US President Gerald Ford urged Americans to combat escalating energy costs in response to the Arab-Israeli war. His Whip Inflation Now (Win) initiative encouraged people to grow vegetables in their yards, car pool and use cold water in the laundry.

‘Win’ badges were churned out and Ford loved pinning them on lapels. Even ex-Beatle George Harrison got one during a White House visit. The exercise was more public relations than serious policy.

But half a century on, Asian leaders are asking people to again adapt their habits as oil and gas prices jump due to conflict in West Asia: Work in short sleeves, ease up on the air-conditioning and skip the elevator, they are advised. Now, as then, these measures are not a substitute for effective monetary or fiscal practices. At best, they represent a short holding pattern.

Cutting back is one of the first things human beings can control. But their role will be a minor one if the current conflict, which began with an attack on Iran by Israel and the US, is prolonged. What is needed are hard decisions on budgets and interest rates.

Fiscal bosses and central banks will be reluctant to deviate greatly from their path before fighting erupted on 28 February. They might get lucky and not have to do much, but it’s better to plan than hope. Forthright indications that they will do what’s necessary is a minimum.

The duration of the conflict—which the International Energy Agency rates as the biggest ever oil-supply disruption—will determine the path of the world economy, on which Asia’s export powerhouses hinge. If there’s a conclusion soon, as the White House has suggested, the impact won’t be huge. Inflation, which policymakers have wrestled down from