In order to counter inflation risks caused by the war in Iran, the new economist Gabriel Felbermayr does not rule out setting maximum prices for gasoline at petrol stations. “We could perhaps discuss upper limits for fuel prices beyond which the government intervenes, ideally coordinated internationally through the release of strategic reserves” he told the “Frankfurter Allgemeine Zeitung” on its Thursday edition. “These limits should not be set too low” he added.
Felbermayr warns of the danger of a fully‑developed energy‑price crisis if the conflict in the Middle East were to continue for an extended period or if the Strait of Hormuz were permanently closed to shipping. “Up to now, nothing of that sort has happened, but if the situation lasts a month or so, we will see a clear danger not only for growth but also for inflation” he said. A doubling of the oil price could cost Germany roughly 0.4 percentage points in growth, he noted, especially since the German recovery is fragile. “This headwind from higher energy prices is anything but helpful”.
On a geopolitical level, Felbermayr argues that the Iran war exposes China’s weakness. “For China these developments are very unpleasant. Iran and Venezuela were part of a larger Chinese geopolitical plan” he said. “The fact that neither China nor Russia can help Iran in any way shows China’s weakness in this situation”. He also pointed out that high energy prices hurt China more than the United States.
In the dispute between the United States and China, Felbermayr advised Germany and Europe to avoid choosing sides economically. “We cannot give up trade partners in the United States or China. Choosing either one would be devastating for us” he warned.
The federal cabinet approved Felbermayr’s appointment to the Council of Economic Experts on Wednesday. Members of this council are colloquially referred to as “Wirtschaftsweise”. He will replace Ulrike Malmendier, whose contract was not renewed at the Union’s request.
