how the Strait of Hormuz is linked to your lasagne – and other everyday goods

The standoff in the Strait of Hormuz has already made fuel and energy noticeably more expensive. But energy prices are only part of the story.

While tensions continue between Iran and the US over that vital stretch of water^[1], another, more subtle economic effect could come into play. “Skimpflation”^[2] is the name for a phenomenon that involves a gradual decline in the quality, quantity or service associated with everyday goods.

Unlike shrinkflation^[3], where the size or weight of a product is reduced, skimpflation affects the value that consumers receive. It happens when companies attempt to keep prices the same while quietly reducing quality, ingredients or service levels.

So instead of raising the price of a ready meal, for example, a manufacturer may replace or reduce^[4] some of the key ingredients with cheaper substitutes. The price and packaging remain the same, but there may be less pork in your sausages, or less beef in your lasagne.

Similar adjustments can also occur in service industries. Restaurants may keep menu prices stable but switch to cheaper ingredients.

Hotels might choose to subtly cut service levels, such as housekeeping, to reduce costs (as some did during the pandemic^[5]). Airlines – already worried about jet fuel supplies – could adopt cost-saving strategies, such as reducing complimentary food or baggage allowances.

In each case, the price paid by consumers may appear unchanged, but the quality or level of service gradually declines, meaning customers effectively receive less value for the same money.

These kinds of adjustments are carefully designed to be barely noticeable. Businesses hope that consumers will continue to buy their products and use their services without being aware of the changes.

But they could become more widespread if economic circumstances mean that organisations need to make more savings. And they represent yet another economic ripple effect that comes from effectively shutting down^[6] a major oil and gas shipping corridor.

The world has already seen how quickly oil prices and energy markets react^[7] to the possibility of supply shortages. For countries (like the UK) which depend heavily on imported energy, these shocks function like an economic tax, raising fuel costs and inflation^[8].

And energy costs affect nearly every stage of modern production and distribution. When fuel becomes more expensive, so does transport, running factories and producing food. A rise in oil prices can quickly evolve into a broader inflationary shock affecting shipping, logistics and industrial production.

These pressures ultimately reach consumers, but often indirectly. And businesses facing rising costs must decide how to respond. Raising prices is the most obvious option, but after several years of high inflation, many firms worry that consumers are already highly sensitive to price increases.

Eventually though, these costs must be absorbed somewhere in the system, either through higher prices or changes in quality and service.

This is why geopolitical energy shocks are often described as “inflationary events”, even if consumer price indices do not immediately capture their full impact. The real cost of living may rise not only through higher prices, but also through a decline in what those prices buy.

Economists might describe this process as a form of “hidden inflation”, where businesses respond to rising costs by quietly altering product composition or reducing service levels rather than raising prices outright. Analysis of recent cost pressures^[10] suggests that recipe reformulation, ingredient substitution and service reductions have become common strategies for firms attempting to manage higher input costs in sectors such as food manufacturing, retail and hospitality.

If instability in the Middle East continues to disrupt shipping routes and energy markets, the UK could face renewed inflationary pressures^[11]. But for households, the effects may not always appear in official statistics.

Instead, they may appear in smaller portions at restaurants, reduced service levels in hospitality, or supermarket products that look familiar but contain slightly cheaper ingredients. These incremental adjustments are harder to measure than price changes, but shape everyday consumer experiences through a gradual erosion of value.

References

1. ^{^} stretch of water (theconversation.com)
2. ^{^} “Skimpflation” (www.economicshelp.org)
3. ^{^} Unlike shrinkflation (theconversation.com)
4. ^{^} replace or reduce (www.which.co.uk)
5. ^{^} during the pandemic (www.revinate.com)
6. ^{^} shutting down (www.reuters.com)
7. ^{^} react (www.theguardian.com)
8. ^{^} raising fuel costs and inflation (www.imf.org)
9. ^{^} Habib B Creation (www.shutterstock.com)
10. ^{^} Analysis of recent cost pressures (blog.bham.ac.uk)
11. ^{^} renewed inflationary pressures (www.theguardian.com)