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The Real Oil Shock

The Weekly Standard

Sunday, January 8, 2012

Fear of the oil market and its impact on the fragile U.S. and global economy is seemingly a driving factor in the Obama administration’s Iran policy. The administration cited that fear in opposing and then weakening legislation that would sanction Iran’s Central Bank and in belittling the prospects for a U.S. military attack on Iran’s nuclear facilities. While the administration is right to be concerned, it should take a longer view. A fuller analysis of the oil market suggests that allowing Iran to develop nuclear weapons capability would produce higher oil prices for a longer duration than would either action taken to prevent it…

It is impossible to predict how the Iranian crisis will play out. The most desirable but least likely scenario is an elegant resolution that inflicts no short-term economic sacrifice on the United States. If the crisis gets resolved through tough sanctions or military action, the economic pain could be significant but relatively short-lived. The worst prospect both strategically and economically is a nuclear-armed Iran. The United States needs to prevent that from developing for both security and economic reasons.

2012-01-08 00:00:00
The Weekly Standard
An Iran with nuclear weapons is the true threat to the world economy.