Thinktank to White House: Iran War Would Push Oil Prices Through the Roof

By Ken Silverstein

As I've written before, the Bush Administration is most definitely drawing up contingency plans for a military strike against Iran, and while that doesn't mean the plans will be carried out it does show how very seriously the White House is weighing the option.

Now, I've learned from a highly reliable source that a conservative thinktank was recently asked to carry out analytical modeling for a potential conflict in Iran, focusing on the likely economic impact of war. The thinktank evaluated a series of likely scenarios, including a blockage by Iran of the Straits of Hormuz—through which moves about 16 million barrels of oil per day, about 20 percent of world production—for a period of six months or more in the event of a high-level conflict. An underlying assumption employed by thinktank analysts was of sustained U.S. aerial bombardment of Iran for 6 weeks, with periodic follow up thereafter.

The thinktank concluded that within two weeks of the conflict's start, the international market price of oil would soar to about $120 per barrel. At that figure, gasoline prices would rise to European levels, probably somewhere in the range of $5 a gallon. The short-term domestic economic consequences for the United States would clearly be disastrous given America's massive consumption of gasoline, and the lack of public transportation alternatives.

The thinktank shared its findings at a presentation for people “brought in from agencies all over town,” my source said. “The figure was far worse than people had expected. Sour wouldn't begin to express [the reaction]. '$120? Are you sure?'”