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War in Iran: A Recession Will Follow

Written by Gary North on January 12, 2012

Saudi Arabia has not increased its oil production, despite rising prices. This indicates that Saudi Arabia is already at its limit of production.

 Top oil exporter Saudi Arabia is nearing its comfortable operational production limits and may struggle to do much to make up for shortages that arise from new sanctions imposed on Iran by the West, Gulf-based sources said.

The kingdom, now pumping just under record rates of 10 million barrels per day, has poured billions of dollars into its vast oil fields, which on paper should ensure it has the ability to ramp up to 12.5 million bpd.

Long-standing oil policy by Riyadh, the heavyweight in the Organization of the Petroleum Exporting Countries (OPEC), sets aside some 1.5 million bpd as protective spare capacity.

But industry sources said pumping anywhere near the declared production capacity might involve extracting heavy crudes the market might not want. It would also be difficult to sustain higher rates for lengthy periods.

“There is very little unused capacity in the Gulf,” said an oil official in the region. “Saudi Arabia could comfortably manage an extra 500,000 barrels a day or so and, if pushed, could go up to 11 million (barrels a day).”

All talk by Saidi officials that the country will increase production is public relations poppycock. The country cannot do this. Its oil fields are slowly declining. New technologies for extracting more oil have failed to add to production. In short, this is fluff:

“Saudi Arabia can easily make 1 million to 1.5 million (barrels per day) available,” a Saudi source said about output beyond current volumes.

If Iran cuts production in any war, there are no replacement sources.

After spending huge amounts on fortifying their production, the Gulf countries are now reluctant to push output to the very brink and leave them bereft of a supply cushion.

China is looking for additional suppliers. It is dependent on Iranian oil. India and Japan are also desperately shopping. There is no new source. There has not been for 40 years.

If war breaks out in the Persian Gulf — Iranian Gulf is more like it — Iran needs to sink two tankers to send shopping insurance rates through the roof. Shipments will cease. Oil prices will skyrocket.

You had better be in gold.

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8 thoughts on “War in Iran: A Recession Will Follow

  1. Blair Franconia, NH says:

    A war with the United States would be a BIG MISTAKE for Iran.

  2. But it would be good for Israel !!!!

  3. We (the U.S.) have known the consequences of war with Iran for many many years and yet we did nothing to extract our own oil from our shores and lands. If we would have started drilling 10 years ago we wouldn't have had to be worrying so much today. It is never too late, DRILL NOW AND SECURE OUR FUTURE.

  4. The U.S. of America has the resources, has the capacity to drill for it, but not the will of its government to seek, find and maintain its independence.

  5. I would make it 20 years ago
    If we had a government that would have let us drill for the oil we have we would be in control of our oil. Then we could tell OPEC to shove it.
    We have more oil in Alaska that we haven't drill for that would be more than what the middle east has pumped since they started pumping oil.

  6. Bill McCroskey says:

    D.C. has used every excuse possible (99% assine) to justify not drilling or extracting oil in North America (read Canada too) Obama tried to stall the new pipeline thru Nebraska long enough for the Canadians to build it to B.C. and ship their oil to asia. The D.C. politicians are in the pockets of the middle eastern oil producers and the multinational oil companies. We have vast amounts of hydrocarbons (or other carbon based forms of energy) within this country's sphere of influence that is being stopped from extraction or refining. It then becomes obvious what the D.C. end game is. I live on the gulf and oil platforms 50 miles offshore aren't visable from our beaches (eyesore??) let alone 200 miles Ms. Pelosi. Cuba & Mexico thanks you so very much D.C.

  7. Ann Wilson Kingsley says:

    This s is a good article. Regarding Ron Paul’s Foreign Policy as it relates to Iran:
    The Israeli Mossad says Iran does not pose a threat to Israel. http://in.news.yahoo.com/iran-no-threat-israel-mo
    A former head of the Mossad warned that Iran should not be attacked because it will set off a regional religious war. http://www.haaretz.com/news/diplomacy-defense/for
    Lt. Colonel Shaffer says Ron Paul’s Iran Policy Most Accurate http://by170w.bay170.mail.live.com/#n=1259539391&…
    Israel has 100s of different kinds of nukes. Ron Paul is trying to keep American tax payers from having to spend more money on wars when we are not being attacked.
    Ron Paul is for a strong military:
    Ron Paul receives more political donations from military personnel than all other candidates combined. “The libertarian congressman boasts more donations from military members than any other 2012 presidential candidate. The claim was determined “true” by Politifact, after the fact-checking group looked at Federal Election Commission filings.” Santorum has a grand total of $750 from all branches of the military combined! $750!!! Gingrich has an “impressive” $4,900! Romney has a whopping $13,300! Ron Paul has $95,567! I wonder who’s foreign policy the military agrees with! We actually know what’s going on over seas, and many of us support Paul! If you want to stop the endless nation building wars, support who the troops support!
    Read more: http://dailycaller.com/2012/01/05/santorum-compar
    The military supports Ron Paul because he wants to end obsolete bases and military hardware, and he is for advanced technological weaponry research. Ethical American soldiers do not want to fight wars against countries that have not attacked the United States. Ethical people do not attack others without extreme provocation.
    Read more: http://dailycaller.com/2012/01/04/ron-paul-gingri

    Vote for Ron Paul!

  8. Blair Franconia, NH says:

    Israel would open a BIG CAN OF WHOOP ASS on Iran.