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Oil at $ 200-plus per barrel? Iran can let it happen




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The latest saber-rattling from and about Iran resonates with the talk of $ 200 oil that Iran can do with only a partial blockade of the Strait of Hormuz [19659001] Reuters has recently reported on the Iranian military operations that could disrupt oil supplies through the Strait of Hormuz: 18 million barrels of oil per day, or about 20% of world supply, how do we get to $ 200 a barrel – an economic analysis is required.

& # 39; crude oil imports and national security estimates -0.04 on the price elasticity of demand for crude oil, ie if the volume delivered to the market is reduced by 1

0%, the price of oil will rise At $ 70 a barrel, shipping disruption in the Strait of Hormuz would lead to a price increase of $ 175 per barrel, totaling $ 245 per barrel t, as can be seen from the graph

Econ 10 Diagram of the impact of partial blockage, 9 million barrels a day. Ed H irs

President Trump is right that the United States has paid a lot of money for the defense of oil interests in the Middle East. The cost of war project at Brown University now estimates the cost of wars since September 11 at $ 5.6 trillion. Added to this are the military losses of 6,961 dead and 52,682 wounded. [196591] President Eisenhower avoids the trap that has captured three consecutive US governments. He rejected requests from Great Britain, France and Israel to join the Suez crisis in 1956. As conflicts in the Middle East depended on who owned oil and mass production, pragmatic President Eisenhower recognized that consuming nations would buy the oil without oil

He also recognized that the strategic dependence on cheap oil from the Middle East undermine US national security and the US military's ability to develop supply lines during the Cold War. President Eisenhower introduced an oil import quota in 1959 to limit United States dependency on foreign crude oil. The oil price in the United States was about twice that of the world market price, and OPEC was formed in response. The US oil industry was stable and robust.

This policy persisted until its vice president, then-President Nixon, eliminated import restrictions.

The irony today is that the United States has introduced a customs regime in the name of national security for the US steel and aluminum industry, but has ruled out the oil industry from similar protection. Why? Today, this policy would benefit our national security by reducing our dependence on OPEC. Higher domestic oil prices will increase employment and promote a faster transition to alternative fuels (see # 39; Crude Oil Imports and National Security & # 39;).

Tariffs or import restrictions can eliminate the risk of wild price fluctuations and protect us from enemies and friend. In 2014, Saudi Arabia increased production to lower its price. US slate plays 250,000 direct jobs, 300+ bankruptcies, $ 250 billion in lost capital, billions of lost GDP and billions of lost local, state and federal taxes The US recovery in domestic production is good, domestic refineries have not found that it is profitable to switch to the lighter crude oils from the slate games, and the industry exports much of it. In the event of an Iranian blockade or a war in the Strait of Hormuz, Congress is likely to ban exports again, but US refineries may not be able to adjust quickly. Shares from the Strategic Petroleum Reserve could help in the short term, but it has never been tested at 10% of the drawdown capacity. Consumers would be faced with bottlenecks and higher prices.

President Eisenhower showed us a way forward.

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The latest saber rattle from and across Iran resonates with $ 200 oil talks Iran can only manage a partial blockade of the Strait of Hormuz

Reuters recently reported on Iranian military operations that fueled oil supplies could break through the Strait of Hormuz: 18 million barrels of oil per day or about 20% of the world's supply comes to $ 200 + per barrel? An economic analysis is needed.

Crude oil imports and national safety estimate -0.04 for the Price elasticity of demand for crude oil, ie if the quantity delivered to the market is cut by 10%, the oil price will rise by 250% With an oil price of currently $ 70 a barrel would disrupt shipping in the Strait of Hormuz a price increase of $ 175 per barrel, shown in the graph for a total of $ 245 per barrel.

Chart Econ 10 of the effects of partial bl ockade, 9 million barrels a day. Ed Hirs

President Trump is right that the United States has paid a lot of money for the defense of oil interests in the Middle East. The cost of war project at Brown University now estimates the cost of wars since September 11 at $ 5.6 trillion. Added to this are the military losses of 6,961 dead and 52,682 wounded. [196591] President Eisenhower avoids the trap that has captured three consecutive US governments. He rejected requests from Great Britain, France and Israel to join the Suez crisis in 1956. As conflicts in the Middle East depended on who owned oil and mass production, pragmatic President Eisenhower recognized that consuming nations would buy the oil without oil

He also recognized that the strategic dependence on cheap oil from the Middle East undermine US national security and the US military's ability to develop supply lines during the Cold War. President Eisenhower introduced an oil import quota in 1959 to limit United States dependency on foreign crude oil. The oil price in the United States was about twice that of the world market price, and OPEC was formed in response. The US oil industry was stable and robust.

This policy persisted until its vice president, then-President Nixon, eliminated import restrictions.

The irony today is that the United States has introduced a customs regime in the name of national security for the US steel and aluminum industry, but has ruled out the oil industry from similar protection. Why? Today, this policy would benefit our national security by reducing our dependence on OPEC. Higher domestic oil prices will increase employment and promote a faster transition to alternative fuels (see # 39; Crude Oil Imports and National Security & # 39;).

Tariffs or import restrictions can eliminate the risk of wild price fluctuations and protect us from enemies and friend. In 2014, Saudi Arabia increased production to lower its price. US slate plays 250,000 direct jobs, 300+ bankruptcies, $ 250 billion in lost capital, billions of lost GDP and billions of lost local, state and federal taxes The US recovery in domestic production is good, domestic refineries have not found that it is profitable to switch to the lighter crude oils from the slate games, and the industry exports much of it. In the event of an Iranian blockade or a war in the Strait of Hormuz, Congress is likely to ban exports again, but US refineries may not be able to adjust quickly. Shares from the Strategic Petroleum Reserve could help in the short term, but it has never been tested at 10% of the drawdown capacity. Consumers face bottlenecks and higher prices.

President Eisenhower showed us a way forward.


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