The Price of Oil, Tripled? An Attack on Iran Could Make It Happen

By Chris Hedges, Truthdig. Posted August 5, 2008.

An attack on Iran, which Israeli and Bush administration officials appear set to carry out if Iranian uranium enrichment is not halted, would ignite a regional war in the Middle East and lead to economic collapse and political upheaval in the United States.

"In short and simple terms, we would be plunged into a depression that would make the Great Depression of the 1930s in which I spent my childhood look like boom times," said William R. Polk, former professor of history at the University of Chicago and a member of the Policy Planning Council under President Kennedy. "Industries would fail, banks would collapse, government revenues would dry up, universities would have to close, health care, even as limited as it now is for roughly 75 million Americans, would virtually cease. In short, something like [what] the South suffered at the end of the Civil War would plague the country."

The passage of vast amounts of oil and liquefied gas through the Persian Gulf would be disrupted. Iranian attacks, carried out with rocket- and bomb-equipped speedboats and submarines, would be deadly and effective. A classified Pentagon war game in 2002 simulated these swarming attacks by Iranian speedboats packed with explosives in the gulf; the Navy lost 16 major warships, according to a report in The New York Times. Iranian oil, which makes up 8 percent of the world's energy supply, would instantly be taken off the market. And oil would jump to over $500 a barrel and perhaps, as the conflict dragged on, to over $750 a barrel. Our petroleum-based economy would come to a halt.

Israel would be hit by Iranian Shahab-3 ballistic missiles. Hezbollah, with its new store of Iranian-supplied rockets that allegedly can reach any part of Israel, including Israel's nuclear plant at Dimona, would enter the conflict. Israel would lash back. Terrorist attacks on U.S. targets would become frequent. U.S. casualties in Iraq would mount as the Iranians rained missiles down on U.S. bases and installations, including our imperial city, the Green Zone. Chaos and mayhem would grip the Middle East. The world financial markets would go haywire.

"Even at today's price, as you know, 14 airlines have gone out of business while others are hovering on the brink of bankruptcy and most have curtailed service and laid off personnel," said Polk, one of the country's leading scholars of the Arab world. "At double or triple today's price, none could fly unless nationalized. A whole range of other industries would be quickly drawn into the quicksand. Ironically, war would push America into a form of socialist economy."

The U.S. economy is already tottering. We recently witnessed the second-largest bank failure in U.S. history, and there are fears that as many as 150 banks could fail over the next 12 to 18 months. There will be 6.5 million foreclosures over the next five years, according to Wall Street analysts. The government is furiously pumping billions of taxpayer dollars into private corporations to keep them afloat. The Congress bailed out the shareholders of Fannie Mae and Freddie Mac. These bizarre "government-sponsored enterprises" own or guarantee half the mortgages in the country--some $5.1 trillion. The Federal Reserve evoked rarely used emergency powers to put billions of taxpayer dollars at risk to stop the meltdown of a non-bank, Bear Stearns, which it never regulated. More than $300 billion has been written down so far. Losses, by the time we are done, could exceed $1 trillion.

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Chris Hedges, a Pulitzer prize-winning reporter, is a Senior Fellow at the Nation Institute. His latest book is Collateral Damage: America's War Against Iraqi Civilians.

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