Smoke fills the air from the oil facility in Abqaiq on Sept. 14, 2019
"Abqaiq is perhaps the most critical facility in the world for oil supply. Oil prices will jump on this attack" Jason Bordoff, director of the Center on Global Energy Policy at Columbia University, said in a statement. US Secretary Mike Pompeo stuck the assault straightforwardly on Iran. He expressed Iran dispatches an exceptional assault on the universes vitality supply. There is no proof the assaults originated from Yemen. In any case, experts say the attack is probably going to excite strain in the district and could rise U.S gas costs
My thoughts, at the point when oil costs rise, purchasers will in general cut back on optional spending, to have enough cash for food and gasoline. These cutbacks in spending lead to lay-offs in optional areas of the economy, for example, vacation and visits to restaurants. The lay-offs in these areas lead to more reductions in spending, and to more obligation defaults. Government funds are particularly influenced by high oil costs. With higher unemployment rates, governments are looked with paying greater unemployment benefits and making more upgrade instalments. On the off chance that there have been numerous obligation defaults (as a result of greater unemployment or due to falling home costs), the government may likewise need to bail out. Simultaneously, charges gathered from residents are lower, as a result of lower business. A noteworthy reason (however by all account, not the only reason) for today's debt issues of the government of enormous oil merchants, for example, US, Japan, and a lot of Europe are high oil costs.
In your opinion, what are the effects likely to be on the global economy?
What possible reasons does the US have for blaming Iran other than "exceptional assault with vitality supply?"
5 comments:
Seeing that this entire operation in the Middle East is most likely rooted from economic incentives, hostility between the US and Iran will drastically increase, ultimately ending with either one's destruction. The US government, at the moment, does not seem to consist the type of officials that would back down and recuperate resources, now that a main source of oil has been put out of commission. They'll turn this event into reason to mount more attacks against Iran, possibly antagonizing them more now that they've attacked the "world's energy supply". In a more optimistic view, US citizens would be more inclined to reduce their oil use, as well as forcing packaging companies to turn to other sources of material, most notably the biodegradable options. In a sense, this could start a new revolution of how all fossil fuels are used, starting a wave of new, more sustainable practices in response to the oil attacks. It does not seem viable that the US can blame Iran for anything else that would deserve a counter attack, as this whole situation was arguably based upon economic reasons.
It seems to be clear that the effect of this event on the U.S. economy will be destructive, raising oil prices and affecting other areas like national debt. In terms of the global economy, I don't have extensive knowledge on the Middle East and its oil industry, but I think it is safe to say that it will also affect the global economy negatively, raising oil prices in other countries that buy their oil from Saudi Arabia and probably causing more damage similar to what will happen to the U.S. Regarding Iran, the current U.S. government tends to place the blame for certain issues on other countries or peoples, so it is not surprising that someone speaking for the government is passionately pointing their finger at another country even when there is no evidence of the attacks originating from there. In addition, the U.S. has not really had a good relationship with Iran, both in the past and now, so some hostility towards the country because of our strained relationship could be a part of the reason the U.S. is blaming them.
The effect on the US economy will most likely be dramatic. We are one of the highest consumers of fossil fuels in the world so American citizens will definitely feel the sting in their wallet as they struggle to pay the higher prices of the gas. As Saudi Arabia is one of the highest producers of oil in the world, other large countries like China and India will be affected the most. In fact, China is already feeling some of the effects of the attack according to CNN. Regarding the issue of Iran, it does not seem right that the US automatically pointed fingers at them. The Yemen Houthis confessed to attacking Saudi so the US does not have the right to simply blame Iran even if we have bad relations with them. It says there has been no actual evidence that the Houthis did it but the US tends to have an ego in world affairs so there may have been evidence, we just chose to ignore it.
The attack on Saudi Arabia causing an uptick in oil prices is actually an outlier - the oil market right now is actually quite bearish. Downturns in global manufacturing is causing lower demands for oil, as economies like India and Germany are slowing down (https://www.reuters.com/article/us-india-oil-kemp/indias-stuttering-economy-hits-global-oil-demand-kemp-idUSKBN1WA1SA). Furthermore, Saudi Arabia announced that the Alqaiq facility that was attacked will be back up and running sooner than usual, adding another bearish factor. One factor that could push oil prices up is China attempting to buy oil in the wake of the shortage.
As a lot of people have already commented, this will definitely take a toll on the US economy. This isn’t the first time, and unfortunately probably won’t be the last, that the US economy and foreign relations take a hit as a result of our high dependence on oil. In 1973, the Arab Oil Embargo rocked the US economy and heavily strained relations between the US and OPEC. If the US continues down this path of heavy reliance on fossil fuels, not only will our economy suffer in the long run, but so will our foreign relations. The US needs to begin weaning off of fossil fuels and especially oil; although change is going to be hard and will almost certainly come with a lot of resistance, this course of action is necessary.
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