[Ayoob]

One possible scenario.

Iran attempts to open an oil trading bourse denominated in Euros at the end of March. In an attempt to knock the US off its hegemonic perch, China dumps its treasury bonds, flooding the market and causing the price to plummet. Other Asian and ME nations dump their dollars, the dollar falls to perhaps 20% of its current international purchasing power, effectively pricing oil to the US at $325 a barrel or thereabouts. This oil price crushes the abiilty of joe sixpack to drive to work in the megalopolises of Southern California and NYC area. Maybe even DC and San Francisco.

Fortunately for the rest of the world, this puts a significant portion of the 12 million barrels we currently import back on the market, and the price in euros actually goes down.

This would require the cooperation of China and Iran. I doubt Russia would object much.

Comments?

[The_Toecutter]

If that happens, people my age will be drafted to fight Iran. America's government will not let its power go so easily.

I'd give it about 1/5 chance of your scenario happening. Very significant threat, enough to cause worry. If America falls, so too would China.

I think it will play out differently.

Iran oil bourse, where Iran trades its oil in Euros. The rest of the oil producing countries aren't so quick to adopt, but America gets restless as the dollar loses about 5% of its value over a month or two, and ramps up the anti-Iran propaganda, in hopes of attacking it, later without regard for public opinion. China objects, then starts making threats to pull out of the dollar. Oil rises to $80/barrel in American dollars by July 2006, gas prices of $2.80-3.00 return.

Of course, a year from now when I look back on this post, I may look like an idiot, but it's fun to guess where this will all go.

Beyond 2006, I think things will get very nasty. 2007, maybe a draft to attack Iran, a little martial law here and there, mixed with some genuine unrest, nations flocknig to trade with the Euro...

[AmericanEmpire]

God, I'm glad I'm passed the draft age. Of course they could always raise it in a major shit hitting the fan war. So I don't completely feel safe.

I sure won't be going to fight no oil wars though so a bunch of goddamn lazy middle class Americans can continue to waste gasoline driving to Walmart in their SUV's. The government can throw me into a concentration camp or shoot me or whatever but I aint going.

[rogerhb]

Perhaps all those who got deferments during the Vietnam war should now be called up first.

[Eddie_lomax]

$this->bbcode_second_pass_quote('Ayoob', 'O')ne possible scenario.

Iran attempts to open an oil trading bourse denominated in Euros at the end of March. In an attempt to knock the US off its hegemonic perch,

...

Comments?

[elroy]

I think it's more likely people behind the curtains will keep pressure on countries not to cooperate with the Iranian bourse. I don't see it being such a huge success at all. But it might just take some more time.

[seahorse]

I don't think the IOB will open in March. I don't think the Iranians could open a bourse in March without already having given some basic information about how to trade on it.

I think the risk between now and the 2008 US Presidential elections is an attack on Iran with the goal of the US securing the Iranian oil fields in the south along the Straights and at the same time getting rid of an arch enemy.

Israel/US both see Iran as being the biggest threat in the area. In the Iran thread, there is a link to an article where Israel stated it was giving Iran until the end of March 2006 to end its nuclear aspirations. That article also suggested Israel's deadline was timed to Iran's satellite program. Israel will not allow Iran to have the ability to "see" a preemptive strike coming. There are some other articles linked on that thread about Iran's space program, and how Iran is planning a second satellite launch this year, either March or April. Apparently, this Iran space program and its ability to "see" a preemptive strike coming is setting the deadline for a preemtive military strike more than the Iranian nuclear weapons program itself (which is still years away). Thus, this is a dangerous time period for all of us.

If there is a military strike, the US will attempt to gain control over the southern Iranian oil fields. After the US was able to seize Iraq's oilfields in 2003 with little or no damage, the US probably feels it can do the same with Iran. This would keep the oil flow open (hopefully), deny the Mullahs of their only revenue source, so who cares what happens up north in Iran (after having also destroyed their reactors, which, without money, they couldn't rebuild). Further, its my understanding the area of the Iranian oilfields have many dissident groups to the Mullahs, thus emboldening the US cause for a strike.

The economic ramnifications of a military strike would be significant, but not anymore significant than allowing the "threat" posed by Iran to go unchecked. Further, the immediate economic fallout would never hurt people like Cheney and Bush who all personally profit from war and further entrench their political powers, in fact, martial law may be needed.

If Chavez acts up, I'm sure the US would welcome the chance to strike him, or at least seize his offshore oil platforms, as he has no navy to defend them.

Even if the dollar deflates, the US, like WWII Germany, would hyperinflate its currency and pay off all its debts, force Americans to continue trading in dollars, outlaw gold/silver.

Just another possibility.

[Ayoob]

Seahorse,

Maybe. I wouldn't discount that position much. But let's just say that the international players... ALL the international players, decided to act in their own best interests. If they did, then the only logical position for them to take is to force the US to stop importing oil, and to force the world market to trade oil in anything other than dollars.

If they do this, 12 million barrels per day flood the world market, forcing oil prices down. Simultaneously, the dollar plummets, making the US import market useless.

The corollary to this is that the market can remain irrational longer than you can remain solvent.

It's an interesting thought experiment if nothing else.

[larrydallas]

My 2 cents on this:

Iran switches to the Euro on March 20th and it has a negligible effect on the US dollar at first. We will not see the price of oil jump $20 in a week when this occurs. It may go up perhaps 10% at best.

However, the real thing to watch will be the possiblity of all out civil war in Iraq. I think this will be the compass that guides how things play out in 06. If they go to all out civil war all of the installed govt. will be illegititmate by default and it will be a clean slate. The US GIs will not be impacted very much by this because they will pretty much face the same stuff (IEDs) they are facing these days. The stigma of a civil war will be more damaging for support of the war at home. I think we will see some form of martial law this year.

The port deal with the UAE is also of significance not so much in that it will bring investment dollars and show good faith but it will tell the world where the Arab money is welcome and where it is not. With all of the enegry requirements China has got it will likely jump at the chance to court this UAE firm if and when the deal with the US gets killed in the Senate. China may not need someone to run their ports but if it means making friends with the people that have the energy they will create a vacancy to be filled by the UAE.

In much more concise terms:
-Iran goes to the Euro-
-dollar devalues a bit-
-UAE deal dies in Senate-
-China makes such deals with Arab nations-
-2006 does not have a new war (bad for elections)-

If there is a war with Iran I'd look for it Jan 07.

[seahorse2]

Ayoob,

Actually, I agree this would be a smart thing to do for those the oppose the U.S. and want to have oil for themselves - basically, bankrupt the US so they can't afford to import it. I just don't know how likely they are to do this. It would take a big concerted action and a lot of balls.

12 million barrels a day would provide a lot of oil and growth for the rest of the world and sit Uncle Sam in the "corner" for awhile. Good plan. How likely? I don't know.