Posted on 12/24/2007 7:54:16 AM PST by DBCJR
According to Chavez, if the United States invades Iran we can expect crude oil to soar to $200 a barrel. ...
Chavezs number appears to be plucked out of the air. If the United States attacked Iran, it would almost certainly result in an upward impact on crude prices. However being Shiite, Iran has no oil-producing allies - other than Venezuela.
The cost in lost production would be no more than 10% of gross world production. In the short term, the United States could use its Strategic Petroleum Reserve to plug the gap, but even if 10% of world production were lost for a considerable time, it would be most unlikely to send prices to $200.
As prices rose towards $200, the basic economic principle of supply and demand would cause oil consumption to decline in the face of rising crude prices. There is no evidence whatsoever that the marginal propensity to consume oil is as low as 0.1, which would be needed for a 10% reduction in output to produce a 100% increase in prices from already-elevated levels. Much more likely, a squeeze in output would spawn a price increase of no more than 20% - to a peak of $120 a barrel - with any higher prices being only a short-term blip due to speculative pressures... oil consumption would decline sufficiently as consumers and commercial interests alike adjusted to the much-higher costs of energy, transportation and raw-materials costs. The U.S. and global economies would undoubtedly slow markedly - and would most probably even drop into a recession. But that recession, in itself, would reduce oil consumption and would therefore arrest any additional upward movement in oil prices.
...
(Excerpt) Read more at moneymorning.com ...
Hutchinson goes onto say:
"Analyzing Chavezs threat demonstrates an important fact, however: At $90 per barrel, crude oil is already up more than 50% so far this year. While the current price may be below the inflation-adjusted equivalent of the $40 "peak" reached in 1980, its important to note that oil prices remained at that pinnacle for a very short time, retreating to the $28 to $32 range where prices stayed until further supplies came on stream in late 1985. Prices then collapsed to $10 a barrel.
Thus, the current $90 plus oil price is likely to be fairly short-lived, even if the frenzied mania of speculation pushes the price up and over the $100 level before the market turns. The global economy is already starting to slow and new International Monetary Fund (IMF) data demonstrates that world growth in the last few years has not been over 5% - which would have been a record - but has actually only been running at around 3.8% somewhat less than the boom times of the middle 1980s."
The cure for high oil prices is world-wide recession. I think the three step plan I suggested is a better alternative. To accomplish that requires some economic engineering supplementary to strict lasier faire market economics. Government tax incentives, even regulation (i.e., automobile fuel efficiency standards) might be necessary.
Venezuela?
DNC Headquarters?
Aye the recesion is the thing. Tis where we'll lower the high prices of the King (Saud)- Tom
Beat me to it!!
Jack
Nope.
Venezualan oil is of very, very low quality.
The country we should invade is the same country we should have invaded right after Afghanistan.
It's the country which is the hot bed of our enemies and is supplying nearly half of the jihadi scum who are killing and maiming our troops in Iraq.
It's the country which is funding the hate filled 'schools' the world over which produce generation after generation of murderous jihadi scum.
Saudi Arabia.
We'd be doing the world a favor to wipe out to the last man the scum known as the "House of Saud" and retake those oil fields.
They were ours to begin with.
L
LOL!!
Beat me to it as well! As soon as I saw the headline, my first thought was the DNC!
Alaska, if only we owned Alaska ...
And the Florida coast line. Too bad Cuba has claimed the Mineral Rights up to the High Tide mark.
DNC Headquarters?
Is there a difference?
Our greatest strength is US ingenuity. To solve the long-term need to replace fossil fuels, the government should offer a reward of $100 billion - tax free, to the first person or consortium which develops a demonstrable new energy source. Such a reward would short circuit the usually inefficient government grant and research process.
Sorry, the DNC does.
Wall Street and Chicago Board of Mercantile Trading.
I think most of the problem is rooted with the commodity traders.
How will they defend those so called rights?
We could invade the Federal Reserve Bank and force interest rates up. That would cause the value of the dollar to rise on world markets and consequently cause the price of oil to drop.
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I will never let my own jackass RINO senator jackass Norm jackass Coleman the jackass live it down for helping us to stay dependent on our enemies, and I will be stuck voting for this jackass again to keep Alf Franken from getting elected.
Did I mention that Norm Coleman is a jackass?
Nancy Pelosi and Babs Baxter’s offices... then we can drill
It would mess us up about as badly as we were messed up during WW-II for about a year, and it would send 90% of the bullies and idiots in the world back to the stone age permanently.
What would be involved in shale oil extraction? Do we have the technology for that?
YES
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