What Would War on Iran Do to the Price of Oil?

A number of blogs have apparently picked up on a particular thought in the recent article by Jon Utley, “What To Do With Cheney?” That perhaps Rove’s sudden resignation is because he has been unable to stop the Cheney gang from a coming attack on Iran, and Rove foresees the consequent political disaster for the Republican party. The threat of $5 per gallon gasoline has generated lots of discussion.

Harper’s Website had a discussion of the threat and a Heritage Foundation study of the consequences, done in 2006. The Heritage Study makes it all sound easy, stating that the U.S. Navy would quickly reopen the Straits of Hormuz, that the political pressure to allow drilling in Anwr in Alaska would then become irresistible. Its worst case scenario is a decline of $161 billion in one quarter’s gross national product and a decline of “over 1 million jobs” in the following year.

Heritage makes no allowance for the war getting out of hand, nor for any destruction of Arabian Gulf oil ports or refining and storage facilities. Most of all it make no mention even for the effect upon other nations, as if the U.S. just lived in a self contained world. In fact Japan, South Korea, and China’s economies would have tremendous shortages of fuel with consequent effect to world trade and prosperity. Heritage Foundation was a major promoter of starting the last war and is a big supporter of it even now.

For a serious study of the consequences of war with Iran we refer you to CATO’s “The Costs and Benefits of Preventative War vs. Deterrence” by Justin Logan.

  • As a Canadian I can tell you this, if and when (more likely when) a war starts with Iran there will be tremendous pressure within Canada to nationalize our own oil and gas industries. Not something most Libertarian types would like to hear, but reality none the less.

    Canadians would be pressured to save our own economy from ruin and paying $3 plus a litre for gasoline would open those Canadians ears and eyes who are unsure of doing such a thing. Canadians are overwhelmingly against the Iraq war – from the start – and it wouldn’t take much to see that we could strangle the U.S. war machine and their new war by putting pressure of our own on the oil and gas supplies. Diverting our exports for national consumption would be priority number one for most Canadians.

    No modern army can run without fuel – especially the fuel gluttonous American army.

    • Sara

      I found the perfect t-shirt to express what this war is all about: http://www.cafepress.com/bswar.169641714 . People who scream “Support Our Troops” need to know what they are really supporting….

  • Bill Federkiel

    Editor,
    After the bombing of Iran and the debacle that will surely follow all plays out I would like the following to be done:
    1. Sen. Lieberman, Bill Kristol, the Podhoretz clan, Doug Feith, Elliot Abrams, Scooter Libby, Judith Miller and Charles Krauthammer ( for starters ) should all be registered as agents of a foreign govt.
    2. We need to cut the ” defense” budget in 1/2.
    3. We need to subpoena all the war profiteering “defense” and war reconstruction companies to appear before Congress.
    4. We need to padlock Fox ” News”.
    5. We need to go back to being a republic instead of the empire that Pres. McKinley gave us ( and has snowballed ever since. )
    6. Israel gets no more military or financial aid..They are a foul country created through: 1. relatively recent immigration. 2. terrorism. 3. ethnic cleansing. 4. massacres. and 5. targeted assassinations..
    7. Patrick J. Buchanan is made President for life so we can fumigate the White House of all this globalist, Israel-first, war profiteering trash..
    Thank you, Bill Federkiel vet./ USMC

    • Alisha

      Yes I pray that sanity prevails on all people and that all Vote Patrick Buchanan for the President’s Office !

  • Mark

    Roy’s right, but there would be more to it than that – we’d have to break from NAFTA. The current agreement says that once we establish a level of delivery (we are currently the United State’s biggest foreign supplier), we may not go below that level even if it means we suffer domestic shortages. This was largely the argument that killed the selling of water to the United States in the form of bulk exports; because once we started it, we couldn’t stop.

    I couldn’t say what percentage of our oil production goes south, but I’m sure it’s more than half, and probably closer to 70%. Similarly, as recently as 15 years ago the Canadian west had all but stopped exploration for natural gas, because we were able to supply something like 180% of our own needs, and it cost more to get it out of the ground than it would fetch on the market. But then, California began to convert many of its power plants to natural gas, owing to years of drought. Almost overnight the price of natural gas shot up, and users here found themselves paying the same price as California. Coincidentally, that was just after a huge PR campaign to get everyone to switch over their home heating to natural gas. Quite a few did, with consequences that were not pretty.

    Personally, I’d like to see Canada expand its trade with Pacific Rim countries, so we weren’t so dependent on the U.S. Our businesses have decidedly put all their eggs in one basket, and every time we try to step back a little from being turned into an American satellite, oil pump and breadbasket, the business community howls that they are being ruined – and argues for closer ties. We’re close enough, thank you.

  • The Iranians will fight as they have never done before,they will also nuke aAmerica in reprisal so mabye this has to be the lesson america has to be taught.and we may all have to suffer for it.

  • James Richardson

    Who knows what would happen to the price of oil other than it would go straight up and up and up. The American and the World economy would be wrecked beyond belief. If such a disaster does happen the Neo-Cons who designed and pushed for this war should have one thing happen to them and that is they should all become aquainted with large square areas surrounded by barbed wire. This should also happen to the citizens of Israel who are clamoring for the US to fight their war against Iran.
    These people know about barbed wire enclosures so it should come as no shock to them. They would all be much better off surrounded by barbed wire, living in barracks and having to report daily to some commandant.

  • “f such a disaster does happen the Neo-Cons who designed and pushed for this war should have one thing happen to them and that is they should all become aquainted with large square areas surrounded by barbed wire. ”

    Sounds good to me.

  • Terrible

    Count me in too on seeing the supporters of criminal ‘pre-emptive’ war incarcerated as the criminals that they are!

  • Mark

    Iran will not “nuke America in reprisal”. Iran currently has no nuclear weapons, and if and when they ever do acquire one, it will likely be crude and lack the long-range delivery capability of a true intercontinental weapon. It’s difficult to believe now, but at one time Iran was the country favoured to be the democratic star of the Middle East. Virtually the entire Iranian armed forces were American armed and American trained. Although there is a great deal of lingering resentment over America having foisted the Shah upon them after deposing democratically elected Mosadegh, Iran is still not very interested in attacking America on its home ground. Anyone who tells you otherwise is simply whipping up fear and hysteria.

    Having said that, Iran is itself much better prepared for an attack now than in previous years. Any saccharine daydreams about a bloodless coup that would see the mullahs fall, Ahmadenijad in jail and the Iranians dancing into the streets with their arms full of flowers and sweets are the talk of lunatics. An attack on Iran would be costly, and if it was nuclear, the world would likely turn on America. Let’s not forget that although many countries have an arsenal of nuclear weapons, only one country has ever used them.

  • Ed March

    Nationalize "our" oil patch? You people in Ontario are planning on stealing more Alberta oil under the guise of another 'National Energy Program,' is that right? Hell, it worked for you under Trudeau, why not again?

    The resources belong to the provinces, not to you boys out East, that's what the Canadian Constitution guarantees us out here in the West.

    Bush may be an insane despot, true, but that don't mean you can use that fact as a premise to steal Alberta oil.

  • Mark

    Exhibit A.

  • JDonald

    I returned to Canada after 9/11 from a Ph.D. career because I was not on the George Bush side of the line that he drew. We have many friends in the USA and enjoy their individual company. But how you guys have let your government hijack your economy and resources is hard to explain. In about 30 days, your Congress will have to approve the raising of your borrowing limit for your national debt from 9 trillion to probably 11 trillion dollars. Forget the cost of the gallon of petrol, each one of you in now indebted by about $30,000, each man, woman and child. Your Iraqi war has been financed by borrowings from Social Security, Medicare and other government funds along with about 2.2 trillion dollars from China. How can you afford another war with Iran, even if you think it is needed? Passing such a debt along to your children and grandchildren along with an increased terror threat is despicable. If you believe in the Iraq war, then pay for it.

    • Chris S

      You are assuming that the people will someday pay off these debts?

      I don’t know about you, but if an IRS agent came to my town knocking on doors and asking each resident for $30,000+ to pay off the debts of the Establishment War Party then my town would probably “wake up” and that agent would be ridden out of town on a rail. I am not a hick, either.

      It will be hilarious when Washington comes out and says that the trillions of dollars in debt are the fault of the people and not the policies. The establishment seems to like the people asleep, and something like that would probably wake them up. I wouldn’t want to be in any Federal office or in the vicinity of any politicians when that day comes, unless you are one of the ones who brought the tar and the down.

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  • Tom S

    Let’s let Iran develope nuclear power. It’ll give us and the rest of the world an excuse to go in there and start over. When the world flushes the Middle East is where it winds up. It is a pitiful place that will never ever get corrected, with wars or “peace talks”. To a degree Bush is right for going after these goons over there and there is a great cost to the United States. Twist it into whatever you want but that is the premise. These people have been fighting for an exponential amount of time mostly in the name of religion. Iran’s want for nuclear capability is nothing more than what North Korea did to us. Extortion. Let’s let them develope these weapons. Let Israel be attacked. Lord knows they’ll retaliate without ambiguity.