The world is currently consuming about 85 billion barrels of oil a day. Approximately 40% of the world's oil supply is transported through the Strait of Hormuz. As we all observed this week the tyrannical country of Iran is flexing it's muscle to discourage Israel and the US from attacking it's nuclear facilities. It is becoming clearer and clearer that Iran can disrupt if not shut down the Strait of Hormuz. The devastation to the US and world economies would be unimaginable.
The US is currently spending about $700 billion per year on imported oil. Some have said that a disruption in the Strait of Hormuz would double if not triple the cost of oil overnight. If the prices do not decline, the US would now spend $1.4 to $2.1 trillion dollars a year for imported oil Clearly this is not affordable and would cripple the US economy. To put the $700 billion of annual oil spend in perspective, that is 4 times the annual cost of the Iraq war.
What happens if the US can not reduce its dependence on imported oil? For starters the US military presence in the Middle East would have to be massive to keep the Strait of Hormuz open and to protect the oil fields in Saudi Arabia, Iraq, and Kuwait. The price at the pump could easily reach $8 to $12 per gallon.
The US needs a comprehensive plan to solve this problem. Domestic sources of energy need to be put into production as soon as possible. Diplomatically and militarily the Middle East must remain "stable" to minimize the disruption of the oil supply while domestic sources are brought online.
If Iran attacks the US or Israel, we may see economic conditions not seen since the Great Depression. Isn't it about time the media starts asking our elected leaders and want to be elected leaders some tough questions that affect all of us? If not we'll continue to get 24 hour coverage of mental recessions and Jesse Jackson wanting to castrate Obama.
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