My friend posted this and got me wondering... how much will this affect us in Hawaii? Probably even more than the mainland as everything comes by boat or air.
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That my facebook feed is not full of discussion about Saudi Arabia highlights how little the American public understands the global economy.
The first thing to understand is that oil markets are fully fungible. What that means, is that the market is fully global. Any one supplier going away just means there's less oil on the entirety of the market. Where the oil comes from, (Saudi exports, US exports) and where it goes (California, Toyko, France) doesn't matter. Five percent off the market affects every buyer and every seller.
Five to six percent of the market is offline now. And the way the Iranians struck was designed to take that oil off the market for a long time. They hit key processing facilities that cannot be easily and quickly rebuilt.
Five percent of the world's supply is gone, and will stay that way for up to a year.
Iran is directly threatening 15-20% more, above and beyond what they just took offline.
Make note: WESTERN ECONOMIES LIVE ON ENERGY.
Products cannot be made without it. Products cannot be shipped without it. Food cannot be grown without it. Food cannot be transported without it.
The price of exactly everything, not just gasoline, is under grave threat from Munich to Los Angeles.
And here is your non-partisan statement for the day: US Presidents do not get reelected in a downward spiraling economy with upward spiraling prices on everything from carrots to diapers.
"But we're an exporter now, it doesn't matter."
Except it does. Why on earth do you think Exxon-Mobile will sell to American refiners and distributors for $80/bbl when they can put it on a tanker and sell it internationally for $240/bbl? No major oil company, no matter where they're located, puts America first. Their bottom line is always first.
I'm not making predictions on where this will go. I really don't know. But this is perhaps the most pivotal security event we've seen since 2003.
Edit: The last time 10% of the world's oil supply was attacked militarily, me and 4000 of my closest friends boarded boats and took a little trip.