What Could Happen if Iran Closes the Strait of Hormuz?

Opinion

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March 14, 2012 Americans met the highest prices of gas ever since the beginning of 2012. Analysts predict that the worst thing could have happen. And suffering from its worst is not yet over. Prices emptied to go over five dollars for this year. To make matters worse, current events include the alarming situation in Iran. There’s an impending threat to close the Strait of Hormuz, which has naturally driven prices of crude higher! Many refineries and industries are now feeling its pinch, too. It has worked its way on oil price hike. It hit off the wallets of main consumers also. So what’s the big deal with the Straight of Hormuz? This is the lane where critical oil shipping exists. Almost seventeen million barrels of oil go through this strait each day. These barrels make up one sixth of the world’s oil production. Actually, the present situation in Iran at this moment is more awful than in Libya. This has alarmed almost all nations as they have bigger demands on oil. Imagine, how can everybody make a living without oil? Large scale industries down to the end-consumers are mostly in need of oil. They won’t continue their tasks in a day without the presence of oil. If there’s a deficit in the oil imports, the tendency would be all products prices will relatively get higher. Of course, it may start on gas prices increasing again. Right now, these alarming threats have come out due to geopolitical reasons. It may further push prices on their way up. Expect that it would hurt many companies and industries. The world’s economy could badly be affected. Now, the burden lies in every country and it so happen that cold countries have a greater burden. Like in Japan, they find it hard producing oil due to their location. Before or until now, the law of comparative advantage is sometimes followed. With the said country, they tend to create goods like guns, ships, planes, robots and technology-based products. They are skilled enough upon the production of these things. They just need to exchange or sell it off to other countries in return for oil. Now, that’s the so-called comparative advantage.  If the case is that Straight of Hormuz will be closed, it may hold back Japan or other countries continuous production. They can’t possibly produce even their basic needs. With almost all eyes set in the Middle East and continues personal checks and negotiations to move forward, it would break the prices of gas pump. Wherever you stay in the United States, the price of oil will stay for up to 5$ and up. The only good news today for consumers is that Iran itself is a chit-chatter. It can never go through lengths to continue its threats. If things can be settled then, it means that the pump prices also have to settle down. However, there’s still no news in the Middle East until these days. It’s making both gasoline suppliers and investors nervous for the 2012 first quarter. With further negotiation between governments of involved countries, you can still expect that everything would turn out right. And everything would be on the right track to each of the country’s diplomacy! {More...}