Ticking time bomb
By E. Ralph Hostetter
America's worst economic catastrophe of modern times well may be approaching more rapidly than the nation realizes, as though a time bomb is ticking away the seconds and the sound is falling on deaf Congressional and Executive Branch ears. That time bomb represents this country's economic life blood - energy, 60 per cent of which comes from foreign sources in the form of oil.
Crude oil now is well established as a world market and is hypersensitive to the slightest change in energy use or production anywhere on the planet.
For example, when a severe hurricane strikes the United States and several drilling platforms in the Gulf of Mexico, and several oil refineries in Louisiana and Texas are temporarily disabled the price of crude oil on the world market spikes by $10 per barrel. The United States has a severely cold winter month, and the price goes up $5 per barrel. Or if the month is excessively mild, the price drops $5 on the world market.
Under ordinary circumstances, these very minor blips in the world oil market would go unnoticed. However, inasmuch as America, the largest oil importer, has been targeted by the dominant media of the world as the "Great Satan," ordinary circumstances are out the window. The world dominant media, no friend of the United States, has positioned itself to exert great influence on the price of oil by the manner in which it hypes a story.
Iran has now taken center stage in world politics. Although Iran is a major oil producer, the United States has imported no oil from Iran since its embargo dating from the Carter Administration.
Polls last week revealed that some 63 per cent of American citizens are in favor of taking some sort of action against Iran's nuclear activities. The suggested actions range from United Nations sanctions, with European countries holding firm alongside the United States, to outright military action, principally the bombing of all nuclear facilities in Iran. Several television spokesmen suggest that Israel do the job as it did in the 1980s against Iraq's nuclear program.
Suppose these were to occur.
At that point, the ticking time bomb goes off.
Iran announces it is cutting off all oil production to the world. The world media steps in and hypes this story to the limit.
Iran need only cut off oil exports for a matter of a few weeks, as the Middle East oil-producing countries did in 1973 following the Arab-Israeli October War. At the time the price of oil jumped from $4 to $40 per barrel overnight and OPEC came into being to hold the price.
This marked the beginning of a world recession. Inflation rose to 18 per cent; interest rates skyrocketed to 22 per cent; unemployment went into double digits over the next eight years.
And, with the exception of a two-week cutoff, the oil flow continued. The damage was done mainly by the announcement and continues to this day.
In recent years the price of oil has spiked to $70 per barrel. The price today hovers around $65 a barrel, having risen rapidly from $10 to $20 per barrel just a few years ago.
Could the $50-plus increase, mostly profit, be used to build war chests for oil-rich Arabs and Iran? Does anyone remember Saddam's billions, found in crates of U.S. dollars? Could these oil-rich nations cut off oil exports for a period of time, however short? Has a light, dim though it may be, come on yet in the American mind?
Any action against Iran could cause oil prices to jump to $100 or more!
Severe damage to the world economy would ensure, not with any oil shortage that could occur but merely the announcement of a cutoff, as in 1973.
Oil will continue to flow as before, but the threat of a cutoff will enable OPEC to hold oil at an unreasonably high price.
Complete energy independence is the only answer to economic survival of this country. At last count that day is still 10 years away.
Either America comes to its senses and develops its own energy resources now, or America will be brought to its senses as it awakens in the chaotic world of deep recession.
And, lastly, the manner in which the United States handles its part in the controversy over Iran's nuclear policies must take into consideration the far-reaching consequences that may develop.
E. Ralph Hostetter, a prominent businessman and agricultural publisher, also is a national and local award-winning columnist.
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