Commentary By Ron Beasley
It used to be that the drums of war would boost the economy. When that war would involve the Strait of Hormuz not so much.
Why? This:
"every $1 per barrel rise in oil decreases U.S. GDP by $100 billion per year and every 1 cent increase in gasoline decreases U.S. consumer disposable income by about $600 million per year."
The rumors of an attack on Iran's nuclear installations was enough.
I don't think the math works for the $1 increase per barrel costing $100 billion in economic activity as the US "only" spends ~500 billion dollars per year on oil. A 1% to 3% change in price will not have a 6x to 20x economic divisor.
ReplyDeleteA $1 per barrel price change is roughly a $6.5 billion dollar change into or out of a hard to substitute for in the short term commodity field.
When you put this post up I was looking for something else in the archives and came across this, which seems to go with this topic.
ReplyDeleteIt Takes a Lot of Petrol to Fight a War
Well, again, it should not be a concern about the price of oil, but about designing an economy that doesn't use oil, or at least essentially doesn't. The price of oil is not going to literally kill us, but continuing to use it in quantity certainly is, between pollution and pumping too much energy into the advancing entropy of the planet.
ReplyDelete