JDs Couch
Well-known member
This Taco Tuesday is a big one. Trump has extended the ceasefire indefinitely. Vance didn't even leave the country, because Iran isn't talking. The blockade is failing according to Lloyd's List which showed that the trackers on at least 26 vessels carrying Iranian cargo both entered and exited the Persian Gulf meaning they made it past the US blocade. NYT has cited the Pentagon as naming 27 ships they turned around for carrying Iranian shipments. So, the blockade has been half effective. The secondary sanctions that were harming Iran's economy pre-war did just get reinstated on Monday, and even though the blockade is full of holes that is technically more shadow fleet vessels than were being stopped before the war. This does mark the first time in this war that Iran is facing a situation worse than when the war started economically. Trump sounds like he is purposely choosing the waiting game.
The biggest problem is that there is an asymmetry to how much this affects each side. Before the war Iran was heavily sanctioned dropping this oil rich country down to an amazingly low 10% of their small economy relying on oil. This was a drop from 85% of their economy relying on oil before 2018 sanctions put in place by Trump. They survived a disruption that big from 2018-2026, and now if the US can keep up the effectiveness of this blockade long-term, we're talking about a 5% drop in their economy, instead of a 75% drop in their economy.
Almost every major oil shock we've had before has been 4-5% of global oil. This includes the '73 embargo, '79 Iranian Revolution, '90 Iraq invasion of Kuwait, and '22 Russian invasion of Ukraine. The '22 invasion gets complicated, because even though on paper it should have been 4% of the global oil supply some believe the shadow fleet caused only a half shock of around 2%. That half shock is part of the economic downturn that led to Biden being unpopular.
This oil crisis right now is roughly 13% of global oil, because 5% was already being diverted, and roughly 2% more has been piped out through repurposed natural gas pipelines, and 20% comes from the Persian Gulf without war. The US can't avoid this, because you have to pay for someone else not to use the oil in a global crisis, just like when America wasn't the primary consumer of Kuwait's oil in the '90 invasion. To make matters worse, this isn't just an oil crisis. It is an oil, natural gas, aluminum, fertilizer, and microprocessor crisis. The microprocessors are facing the deepest cut of eventually only having 2/3 the production capacity we had before.
All those other shocks I mentioned took 30-200 days to hit our economy with a median hovering somewhere around 90 days if you count smaller shocks, but this crisis is 3 times bigger than all the biggest hits we've ever taken, and it still can get to 4 times bigger if Iran just blows up a few more pieces of indefensible infrastructure. The US never does well in these economic shocks, and this is the biggest shock we've ever had in history in both width and depth. Trump has finally found a way to make Iran worse off instead of better off, but they are facing a tiny addition to the pain they were already suffering. We are facing something worse than anything we've ever faced supply-shock-wise in the past. I personally don't imagine the US public will be happy with bearing the brunt of this economic downturn with no clear objective achievable for at least the next few years.
The biggest problem is that there is an asymmetry to how much this affects each side. Before the war Iran was heavily sanctioned dropping this oil rich country down to an amazingly low 10% of their small economy relying on oil. This was a drop from 85% of their economy relying on oil before 2018 sanctions put in place by Trump. They survived a disruption that big from 2018-2026, and now if the US can keep up the effectiveness of this blockade long-term, we're talking about a 5% drop in their economy, instead of a 75% drop in their economy.
Almost every major oil shock we've had before has been 4-5% of global oil. This includes the '73 embargo, '79 Iranian Revolution, '90 Iraq invasion of Kuwait, and '22 Russian invasion of Ukraine. The '22 invasion gets complicated, because even though on paper it should have been 4% of the global oil supply some believe the shadow fleet caused only a half shock of around 2%. That half shock is part of the economic downturn that led to Biden being unpopular.
This oil crisis right now is roughly 13% of global oil, because 5% was already being diverted, and roughly 2% more has been piped out through repurposed natural gas pipelines, and 20% comes from the Persian Gulf without war. The US can't avoid this, because you have to pay for someone else not to use the oil in a global crisis, just like when America wasn't the primary consumer of Kuwait's oil in the '90 invasion. To make matters worse, this isn't just an oil crisis. It is an oil, natural gas, aluminum, fertilizer, and microprocessor crisis. The microprocessors are facing the deepest cut of eventually only having 2/3 the production capacity we had before.
All those other shocks I mentioned took 30-200 days to hit our economy with a median hovering somewhere around 90 days if you count smaller shocks, but this crisis is 3 times bigger than all the biggest hits we've ever taken, and it still can get to 4 times bigger if Iran just blows up a few more pieces of indefensible infrastructure. The US never does well in these economic shocks, and this is the biggest shock we've ever had in history in both width and depth. Trump has finally found a way to make Iran worse off instead of better off, but they are facing a tiny addition to the pain they were already suffering. We are facing something worse than anything we've ever faced supply-shock-wise in the past. I personally don't imagine the US public will be happy with bearing the brunt of this economic downturn with no clear objective achievable for at least the next few years.
