Consequences Could Include Skyrocketing Energy Costs, Higher Unemployment and Inflation for U.S. Economy
WASHINGTON, Oct. 10, 2012 /PRNewswire-USNewswire/ -- Today, the Bipartisan Policy Center (BPC) released a study evaluating the economic consequences of a nuclear Iran. The analysis employs traditional economic modeling techniques to examine both how energy markets might respond if Iran acquires a nuclear weapon and the possible consequences for the U.S. economy.
The BPC report, The Price of Inaction: An Analysis of Energy and Economic Effects of a Nuclear Iran, concludes that a nuclear Iran would alter the political landscape of the Middle East and increase the likelihood of instability, terrorism and conflict. Simply the expectation of instability and supply disruption triggered by a nuclear Iran could significantly drive up fuel prices. Significant price increases would result in higher unemployment, higher inflation and a reduction in the nation's gross domestic product (GDP).
The bipartisan task force that developed the paper is co-chaired by former Senator Charles Robb and General (ret.) Charles Wald, and comprised of former elected leaders, policymakers, military officials, energy analysts and economists, including Ambassador Dennis Ross and economist Dr. Daniel Ahn.
"A nuclear Iran not only poses geopolitical risks, but could severely impact the U.S. economy," said Senator Robb. "Any public discussion we have on this enormously challenging issue must consider both the cost of halting Iran's nuclear ambitions, and the cost of not doing so."
The BPC report analyzes five scenarios that project a variety of political, diplomatic and military consequences of a nuclear Iran. It also examines the amount of global oil supply each scenario could disrupt, how a disruption would affect fuel prices and how those prices would impact the U.S. economy through inflation, unemployment, housing prices, and a diminished GDP.
"This analysis does not attempt to predict what will happen the day after Iran becomes a nuclear power," said BPC Foreign Policy Director Michael Makovsky. "Instead, it lays out plausible scenarios that could have lasting implications for the U.S. and global economies. We hope our analysis inspires further discussion of this complicated issue."
Because Middle East oil is critical to the global economy – fulfilling nearly 20 percent of the worldwide daily oil demand – a disruption to the region's oil exports would have a significant effect on the supply and price of oil worldwide. BPC concluded that if Iran were able to acquire nuclear weapons, the price of oil could jump 25 percent and gasoline prices could increase by more than 30 percent within three years. In the United States, inflation and unemployment could increase another 1 percent, while the gross domestic product could contract by more than 1 percent. These increases are projected to occur absent any direct conflicts or significant disruptions. Instead they represent the "risk premium" that would result from increased expectation that a significant disruption in global supply is more likely. If any of the scenarios were to actually occur resulting in a significant global supply reduction, the impact on the global economy would be far more severe.
"Oil continues to play a pivotal role in sustaining economic growth," said Dr. Daniel Ahn, a chief commodities economist with Citigroup, and a member of the BPC Iran Task Force. "Historically, all but one U.S. recession since World War II was associated with an oil price shock – which is why we should not discuss the ramifications of a nuclear Iran without carefully examining the economic impacts of such a scenario."
To download this study and previous reports that evaluate U.S. options to contend with Iran's nuclear ambitions visit: www.bipartisanpolicy.org.
TASK FORCE CO-CHAIRS
Senator Charles Robb
Former Governor of and U.S. Senator from Virginia
General (ret.) Charles Wald
Former Deputy Commander of U.S. European Command;
Bipartisan Policy Center Board Member
TASK FORCE MEMBERS
Dr. Daniel Ahn
Senior Economist and Head of Portfolio Strategy, Citi Bank New York
The Honorable Christopher Carney
Former U.S. Representative from Pennsylvania
Ambassador Eric Edelman
Former Under Secretary of Defense for Policy
Secretary Dan Glickman
Senior Fellow, Bipartisan Policy Center;
Former Chairman, U.S. House Permanent Select Committee on Intelligence
Founder of Energy Policy Research Foundation Inc.
Former Assistant for National Security Affairs to the Vice President
Senior Fellow for Middle Eastern Studies, Council on Foreign Relations
Reuben Jeffrey III
Former United States Under Secretary of State for Economic, Business, and Agricultural Affairs
Admiral (ret.) Gregory Johnson
Former Commander of U.S. Naval Forces, Europe;
Senior Adviser, Bipartisan Policy Center
General (ret.) Ron Keys
Former Commander, Air Combat Command
Former Assistant Secretary of State for Arms Control and Nonproliferation
Ambassador Dennis Ross
Counselor, The Washington Institute for Near East Policy;
Former special assistant to President Obama and NSC Senior Director for the Central Region
The Honorable John Tanner
Former U.S. Representative from Tennessee
CEO and Chairman of the Board of Directors
About the Bipartisan Policy Center
Founded in 2007 by former U.S. Senate Majority Leaders Howard Baker, Tom Daschle, Bob Dole, and George Mitchell, Bipartisan Policy Center (BPC) is a non-profit organization that drives principled solutions through rigorous analysis, reasoned negotiation and respectful dialogue. With projects in multiple issue areas, BPC combines politically balanced policymaking with strong, proactive advocacy and outreach. http://www.bipartisanpolicy.org/.
SOURCE Bipartisan Policy Center