Oil: Strategic Economics

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Oil: Strategic Economics

Global Conflict and Economic Terrorism.

Here are the possible scenarios:

1. Conflict engulfs the Middle East and oil stops shipping to America from most of this part of the world.

2. Terrorists gain political power and refuse to distribute oil to America.

3. Oil prices become so high, let's say $5 - $8 a gallon.


Your solution(s) would be:

The solutions could be as follows:

(1) Stop providing Israel with weapons of mass destruction and funding its quasi-fascist nation state

(2) Remove the troops out of Iraq and other Middle Eastern regions, and cease all activities with Saudi Arabia

(3) Roll the United States military budget down to zero, and there will be no more deficit

(4) Begin funding for alternative energy sources, most notably wind, solar and geothermal

(5) Provide tax breaks for those buying hybrid vehicles and other alternative-energy sources

(6) Establish an effective public transportation system across the nation

(7) Establish hefty luxury taxes on SUVs

- Ray M -

Laugh long and loud?
I'm already paying $7!

Finally Americans would have to give up their gas-guzzling habits and build cars with at least reasonable fuel economy, marginally cutting back on their world-polluting ways.

On the other hand there would be a massive incentive to swing to bio-fuels: ethanol or diesel. Not a terrible thing for those countries who have acreage not needed for food, but a terrible dilemma for those who would become doubly needy.

Those areas outside the middle east with oil reserves would see a boost in their economies, but also in political pressures and the risk of instability.

(1) Stop providing Israel with weapons of mass destruction and funding its quasi-fascist nation state

"I see no reason to have such weapons, likely a fear based capability as to enable response to such an attack upon that nation. The problem however is Israel is not really fascist. Terrorist are indeed so."

(2) Remove the troops out of Iraq and other Middle Eastern regions, and cease all activities with Saudi Arabia

"I'm unsure of the political dynamics of Saudi Arabia and the military. Removing the troops from Iraq at this point would be stupid, not having them there in the first place would have been genius. Removing them now with the obligation of stability for the innocent would be hasty and wrong. The U.S is now obligated to secure that country and to prevent civil war."

(3) Roll the United States military budget down to zero, and there will be no more deficit.

"Implausible, why not paint targets in all major cities and ask other capable nations to deploy what they will."

(4) Begin funding for alternative energy sources, most notably wind, solar and geothermal

"Great idea, start adding taxes to dirty fuels and other things not required to sustain life for the future sustainment of life now."

(5) Provide tax breaks for those buying hybrid vehicles and other alternative-energy sources

"Good idea, if they are not already doing so now, invest into the national security of the U.S not being so dependent upon oil."

(6) Establish an effective public transportation system across the nation

"Magnetic high speed rail."

(7) Establish hefty luxury taxes on SUVs

"Yep that too, no one needs those gas guzzling hunks of metal really, unless required for small business."

COOL-AID DRINKER ALERT!!

I'd use military force, economic force, and diplomatic force to attempt to get the terrorists to back down on their overpriced oil. One of those would probably work for the first 2. The last scenario means absolutely nothing, so what, prices are high? I would not do anything as that would lead to even worse economic problems. Sure, things would change but if we do anything then we affect the market's ability to adapt to these issues.

I would probably do very little on the domestic front, maybe promote more public transportation but really, consumers can make rational decisions based on higher gas prices and gas consumption would probably drop down. High intervention in the economy is not justified in this situation maybe I would allow some monetary policy to prevent a major recession from the rapid change in the economic structure but I am not sure about this because I might affect the market's auto-stabilizing tendency negatively. After all, there is a theory to the business cycle that it is caused by monetary changes.

The problem I see here, is that were not talking about a standard free market here. We have a cartell (actually, a few that co-operate) that deal in a product the world can't live without. This price hike has done NOTHING to curb demand. It would take gas going well over $4 a gallon before you would see a drop in consumption. What you'll have before you see a drop in demand, is a recession in all other segments of the economy. People will likely buy less food before they buy less gas. I'ts like a drug addict who sells his TV to buy another fix.

The problem I see here, is that were not talking about a standard free market here. We have a cartell (actually, a few that co-operate) that deal in a product the world can't live without. This price hike has done NOTHING to curb demand. It would take gas going well over $4 a gallon before you would see a drop in consumption. What you'll have before you see a drop in demand, is a recession in all other segments of the economy. People will likely buy less food before they buy less gas. I'ts like a drug addict who sells his TV to buy another fix.

It is largely inelastic, you are right on that. However, if we have cheap gas then alternative forms of transportation and fuel would never arise, people never adapt to the problems of gas-famine if we live in an artificial state of plenty, they need to make changes in their own lives, which includes their car choice and such and that will not be gained from continuously giving them cheaper gas prices. The situation never stated the cause of the gas price, so I took it to mean that it was the increased demand of the newly developing areas of the world and the increasing cost to take advantage of remaining oil deposits and process them, . Of course, I probably should have an investigation into the cause of the price hike, if it is the market itself then all that can be done is encouragement of new energy sources and public transportation, and the reason I didn't mention those options is that I have been reading too much in terms of Austrian economics. If it is the company then of course I'll go TR on those stinking companies.(Ok, I know that Taft busted more trusts but TR was the known trust-buster) Frankly, I do not believe that we will have oil permanently, so the junky will have to eventually get off of his drug and some other solution will have to take its place but I do recognize that a recession would take place as well as major inflation... which oh crap... I hate stagflation. Dang, I did not look at it clearly enough, which means that I might resort to the controversial supply-side economics as I have heard few theories to deal with it.

Anyway, thanks at the very least for having me look over proposed policy errors, it is just that gas problems are going to cause major shocks to the system no matter what is done, there is no perfect solution.