Is the war in the Middle East is Australia’s COVID 2.0 moment?

Australians may be experiencing a sense of deja vu, as they once again face travel and supply chain disruptions, panic buying, and requests to work from home.

While the trigger this time is the war in the Middle East, the consequences of the ongoing conflict certainly bear some similarities, to those of the COVID-19 pandemic, and the measures implemented to limit the spread of the virus.

The current crisis has also drawn COVID-19 comparisons from federal politicians, with Treasurer Jim Chalmers likening the potential economic damage of the war in the Middle east to that of the COVID-19 pandemic.

“We’ve already seen four major shocks over the past 2 decades — the GFC (2007-2009 global financial crisis), a major pandemic, a global inflation shock, escalating trade tensions — and this oil shock could become the fifth,” he said in a pre-budget speech delivered on 19 March.

Oil prices have surged since the the United States and Israel attacked Iran on 28 February, sparking a regional war and leading Iran to close to the Strait of Hormuz — a shipping lane on Iran’s southern border through which about a fifth of the world’s fuel flows — to many vessels.

Prime Minister Anthony Albanese has also invoked the COVID-19 pandemic as a cautionary example, saying it exposed gaps in coordination and decision-making that should not be repeated in responding to the current crisis.

So, are we really going through a COVID 2.0 moment, or does the current crisis only share superficial similarities with that of the global pandemic that began to shake the world from 2020?

Working from home

Greens senator Peter Whish-Wilson questioned on Wednesday whether MPs, senators and their staff from outside the ACT should return in-person to Canberra for the upcoming sitting week.

He suggested that, to reduce demand for petrol and aviation fuel, parliament should return to measures implemented during the COVID-19 pandemic, during which systems were installed so business could be carried out remotely.

While acknowledging the many differences — the main one being a public-health measure versus a fuel-saving measure — he said it “feels like it’s a similar crisis now” and that politicians needed “to lead by example and show the Australian people that if we can do it, you can do it too.”

So far, there’s no signs that his advice is being taken up, or that any WFH options would be provided for senators and MPs — something that Industry Minister Tim Ayres recently recommended to the general public and businesses.

“Work from home is a viable option for many, many people, and they’ll make that call,” he told ABC News on Monday.

Pressed by David Speers on ABC Insiders on Sunday, Energy Minister Chris Bowen said the International Energy Agency’s recent recommendation for more WFH where possible was a “sensible thing to do in any environment”.

However, there are no signs at this stage that governments will introduce any form of work from home mandates — a clear difference to the numerous work from home public health orders issued by state governments to try and limit the spread of COVID-19.

These mandates issued by state governments, through their chief health officers and premiers, issued work-from-home (WFH) mandates during the COVID-19 pandemic under public health orders.

It’s currently unclear how many companies are voluntarily increasing WFH allowances, but Professor Paula Brough from the Griffith University’s Centre for Work, Organisation and Wellbeing said she believes “some organisations are encouraging workers to do that [work from home]”.

She added that she believes there are “some discussions happening about both domestic and international travel requirements for work for businesses and how those requirements could be reduced,” such as whether international conferences can be converted from in-person to online events, or whether companies “really have to send a representative” to such events.

She also highlighted that COVID-19 had accelerated the take-up of work from home-enabling technology and the social acceptance of more hybrid work arrangements.

“I think that horse has bolted, totally,” she said, adding that many workers already expected to WFH several days a week and were doing so with the support of “most organisations”.

“Obviously, there’s some workers who are front line who can’t work from home, and they’re often excluded from these discussions. So I think it’s important to acknowledge those.”

Brough didn’t entirely rule out the possibility of work from home directives for some workers, saying that “we have to wait and see really how bad it’s going to get” in terms of fuel supply and price shocks.

If the government was to consider such directives, it would certainly face pushback from parts of the private sector, with the Business Council of Australia (BCA), which represents more than 100 of Australia’s biggest companies, urging Australia to avoid COVID-style mandates for white-collar jobs.

The BCA’s chief executive Bran Black said on Monday that work from home arrangements should only be considered for those unable to commute on public transport or afford fuel.

Meanwhile, at least one trade union — the Financial Services Union — has called for its members’ employers to suspend “office attendance requirements,” saying it was “a reasonable and practical measure that your employer can take right now to help keep your costs down”.

Travel and tourism

When it comes to how the war in the Middle East has affected travel and tourism, Avlaw Aviation Consulting chairman Ron Bartsch said that, while there were some similarities, nothing in recent weeks “can equate to what happened to the international aviation industry during COVID”.

“Borders were completely closed for certain times in certain countries. Certainly in Australia, we had our borders completely closed to international operations,” said Bartsch, who is also a former head of safety for Qantas Airways.

“Certainly it has affected a lot of operations and people travelling to and from, say, Europe, which has gone through the Middle East and through those important hubs in Dubai, Doha and Abu Dhabi and the like.”

“During COVID, both supply and demand were restricted because of the sanctions imposed on aviation and the closure of borders. Here, the demand is still there, but the supply has been significantly reduced,” he said, especially for the airlines that are domiciled in the Middle East, such as Emirates and Etihad Airways.

University of Queensland Professor Sara Dolnicar agreed, telling SBS News that, while the war has led to significant disruptions to travel and tourism, these are “very different in nature” to those caused by the COVID-19 pandemic, also highlighting that “people were legally limited from moving” during the pandemic, while borders remained open and only “certain routes” had been affected.

“So, people are rethinking the way, the mode, of travel. They’re not limited, however, in where they want to travel. State borders aren’t closed, Australian borders aren’t closed,” Dolnicar said.

“It’s absolutely more difficult and there’s no doubt flight prices will go up … but still you can [travel internationally]. If you want to fly to Europe today, and you have the money to do it, you can. You just need to change your routes.”

“So the situation is quite different, but no doubt it will affect people’s vacation behaviour,” she said, adding that there were already reports of a drop in demand throughout the tourism sector more broadly.

She also said there was another “big parallel” between COVID-19 and now, in which travel disruptions or restrictions “led to a dramatic change of how people undertook vacations”.

“So, during COVID, people had to be creative. They had to say, ‘Well, I still want a holiday, so what am I going to do? I’m going to do a road trip in my state’,” she said, adding that current petrol prices would also be a major discouraging factor for many Australians to travel domestically.

Both Bartsch and Dolnicar also said that one of the reasons airline prices were going up was because aviation fuel is refined from crude oil, and the price of crude has spiked dramatically since the beginning of the war.

“I remember back in 2008, when the price of crude oil went up to US$150 a barrel. I was in head of safety in Qantas at the time, and that was drastic to our operations because it necessarily meant passing on those increase in prices to the travelling public.

‘Hoarding toilet paper’s one thing, hoarding petrol …”

While the product might have changed, from toilet paper to petrol, panic buying is another COVID-19-era phenomenon that has reemerged since the war in the Middle East broke out.

The motivation for the behaviour is also similar, with people fearing that supply chain disruptions may lead to the products becoming either unaffordable or unavailable.

University of Sydney economist Luke Hartigan said there some concerning differences in what could happen to people who’ve majorly stocked up on petrol.

“The thing about hoarding is, well, hoarding toilet paper’s one thing, hoarding petrol is quite dangerous.”

He said he’d heard a concerning anecdote of someone bringing jerry cans into their apartment and his immediate reaction was to think: “Oh my God, that’s a fire hazard.”

Hartigan said he agreed with the federal government’s repeated statements that petrol shortages in some areas were caused by panic-buying rather than supply issues.

“I think that’s been more to do at this point with people buying more than they usually do, and that fits in with the panic buying thing, less so then there’s been reduction in the ships coming in,” he said.

“It makes sense because if you think prices are going to rise, you buy now and you think, ‘Well, if I just buy a little bit extra, it’s okay,’. but if everyone starts doing that … the system’s not designed for that, so you end up with the shortages.”

“It makes sense for people to do that on an individual level. It’s just a problem and everyone does it at once.”

However, he said that his main concern was that, if the war spiralled further out of control, and the Strait of Hormuz remained blocked, then the government could introduce petrol rationing.

On Thursday, Opposition defence spokesperson James Paterson called on the government to use far-reaching emergency powers, that would grant the energy minister direct control over the oil market, including the implementation of fuel rationing.

If that happens, he said, “then there will be issues with supplying of other things, so truck deliveries for groceries, and my concern would be that we may see return of panic buying of grocery items”.

“If [the war] was to go on and we were to see fuel rationing, then it’s a very open-ended question where it could go. It could be quite bad.”

Supply chain shocks

Hartigan said that, under a scenario in which “Trump does bomb [Iran’s] energy infrastructure, the Iranians then start bombing the infrastructure in the other Arab countries around them” it was likely that it would trigger a “a global recession, high inflation, and energy prices, and particularly oil prices, could go to unseen levels”.

Bartsch also said said that, if the war continues and oil prices remain high, it could cause “supply chain issues, that will have a multiplier effect on all the cost of services” that could lead to “worldwide recession”.

This is one way in which the current situation is comparable to COVID-19, which caused a global recession that is generally recognised as the most significant economic downturn since the Great Depression between world wars one and two.

However, while supply shocks and increasing freight costs is in some ways redolent of that experienced during COVID-19, logistics disruptions at that time had different causes, such as border closures, lockdowns in countries with large manufacturing sectors and congestion at ports as demand for certain goods plummeted.

As Professor Rico Merkert from the University of Sydney Business School points out, the current cause of the supply shocks is more specific, and in some ways the polar opposite of what occurred in the early days of the COVID-19 pandemic.

“The other thing that is happening or that’s different to COVID-19, where the oil price decreased dramatically in the first few weeks after the lockdowns came into effect, we now have the opposite with the oil prices being very volatile, but increasing rather than decreasing,” he told SBS News.

“So oil prices have become extremely expensive and so have jet fuel prices. And that’s one problem that the fuel price has become really elevated,” he said, adding that this wasn’t just an issue for passenger air travel, but also for air freight.

“One thing that happened during COVID-19 was that, while air passenger services were really badly affected, the freight rates for air cargo helped airlines to get through that crisis. So because both on the shipping side of things, but also in aviation, air freight rates went through the roof.”

However, he said that if “there’s a further escalation [in the war], then I’m not so sure if those [oil] vessels will come through to an extent that will help with that supply chain issue in terms of jet fuel”.

“So we may get a situation where it’s no longer the price only; it’s also the availability of jet fuel, which will become a problem for airlines. And so you will see airlines cutting flights,” he said.

“If the freight rates for commodities are high, the freight forwarders and then shippers, they will pass those costs onto the consumers,” he said, clarifying that he was talking about both shipping and air freight.

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