How The Iran War Will Explode American Cost of Living

Today we got to talk about something crucial that's happening because we all know that the United States is at war with Iran right now and we got to start thinking about what $200 a barrel oil is going to start doing to the economy guys because it already crossed $100 a barrel and before you think $200 a barrel is preposterous it's not because something like this has happened before we have historical precedents for this exact scenario to play out something like this happened back in the 1970s with the oil embargo that we had back then so I want to go over all of the knock-on effects that we could see happen how all this is going to affect us over here in the United States and even if it doesn't reach $200 a barrel a lot of the things that we're going to talk about are still going to be affected either way just how severely things are going to be impacted is yet to be seen and I know it might seem like well this is all far away this is happening on the other side of the world how does this affect us over here in the United States well it's going to affect your wallet that's how it's going to affect you because everything from the price of electronics, housing, clothing, food all sorts of essential things that we need could be affected by this and it all has to do with a very small piece of geography called the Strait of Hormuz I don't know if I'm saying that right but I'll show you guys an area on the map of where this is and basically this is kind of being held hostage right now by Iran and they're not letting any oil tankers move through this area and it's dropping the world's oil supply by about eight million barrels per day right now so the reason why this Strait of Hormuz is important is because this is where all of the oil tankers in this region pass through in order to be exported throughout the rest of the world it's estimated that about 20 million barrels of oil per day move through here when things are moving and operating as usual that's more than one-fifth of the entire global oil supply guys and it's also about 20 percent of the world's liquefied natural gas exports as well so the biggest risk for us here in America isn't necessarily the military side of things it's more that this international shipping hot spot being frozen up by this conflict is going to have a huge consequence on energy costs which has ripple effects throughout everything else let's start with the most obvious one gas prices this is something you've already seen an effect from this conflict okay before the conflict gas was in the low three dollar a gallon range now you're looking at 350 a gallon or higher depending on where you live I've already seen reports out of certain areas in California where it has skyrocketed to seven dollars a gallon which is absolutely insane this affects the price of jet fuel diesel prices now are hovering very close to five dollars a gallon on average nationwide it is about four dollars and 85 cents right now and it is climbing very fast and guess what diesel fuels the entire logistics network worldwide every truck that delivers food to grocery stores every shipment arriving at a warehouse it's all diesel guys and guess what when the cost of diesel goes up so does the cost of everything that diesel has to move and if you think that oil cannot hit two hundred dollars a barrel think again because going back to the 1970s oil embargo price of oil back then actually quadrupled practically overnight okay in 1973 oil was three dollars a barrel within just a few months it jumped to twelve dollars a barrel okay and before this conflict oil was around fifty or sixty dollars a barrel and then proceeded to jump up to a hundred and quadrupling from around fifty would be guess where two hundred dollars a barrel oil so it's not like this hasn't happened before and because it has happened before it can definitely happen again and even when you adjust for inflation it's an equivalent of oil going from about eighty dollars a barrel to over two hundred dollars a barrel today so it is exactly the same ratio of a price increase that we saw back then and it had devastating knock-on effects on the economy back then and no doubt it would again today back then people were waiting in line for hours just to be able to buy gasoline and some states even introduced gasoline rationing meaning you could only buy gas on certain days depending on your license plate number even the national speed limit was lowered to 55 miles per hour in order to conserve fuel the result was a lot of inflation and a recession and later on the economists once they saw everything in hindsight they actually called it stagflation and the reason why that's dangerous is because if you've been paying attention to my content over the past year we're basically already in a stagflation type environment in this economy and this is just going to amplify it and it could be amplified much more than any of us think because fast forward to today 50 something years later everything heavily relies on global shipping you know everything is just in time when it comes to supply chains we have massive logistics networks we have data centers eating up a ton of energy worldwide like everything is way more interconnected than it was back in the 70s so this can have a much bigger impact than it did last time around not just because of prices but also because of the disruption in fact if we get 200 a barrel oil guys it is not going to be unreasonable to say that we could have potentially seven to nine dollar a gallon gasoline and it's an average price here in the U.S. not accounting for you know the extremes in places like New York and California and things like that diesel could go even higher and remember since diesel powers everything the entire global network that would translate into higher grocery prices higher plane tickets higher delivery costs higher construction costs higher rent and housing costs you name it and also we have a big risk of this making food prices go up and food has already seen a tremendous increase in prices over the past few years but the reason why is because oil and natural gas are a critical component for fertilizer production natural gas is actually the main ingredient used to produce ammonia and nitrogen fertilizers that are used to grow crops and if energy supplies are disrupted fertilizer prices spike and that eventually leads to higher food prices globally and food actually gets hit twice from this disruption right it gets hit on the fertilizer side of things and it gets hit because the higher fuel costs to produce the food and to move the food throughout the global network goes up as well so who knows where food prices could end up from this so all of the crops that are grown across the world would go up in price tremendously in just one growing season and you would feel that in your grocery bill you would feel it in restaurant prices anything you buy in terms of food oh and don't forget the food that animals have to eat because we eat the animals that goes up too also oil is a crucial component when it comes to the petrochemical industry well what is that that means things like plastics packaging different clothing fibers that they use polyester clothing for example whether you like it or not is made with petrochemicals okay and i'm getting hit with a little bit of rain here so i'm going to kind of like stand still and try to stay dry as much as i can but anyways the supply chain goes like this you have petrochemicals used to make polyester polyester is then used to make fabric and then you have that fabric that's used to make clothes and so if oil supply gets disrupted guess what that means clothing prices go up packaging prices of all different types of packaging related to this goes up medical supply prices go up even car manufacturing prices go up man i've been fighting this rain all day guys to come out here and shoot this video it's been absolutely brutal but i just wanted to let you know that this is like my level of dedication to like get outside and shoot these videos rather than do them from my home office which i could easily do but i know i enjoy the outdoor videos and you guys do too so just letting you know that it's been a struggle today but i'm trying to get it done you know oil and gas production are used for so many more things that i didn't even know about guys until i stumbled across this report which thank you rick for sending this to me that's where all this information is coming from the link for it's down below but also oil is used to make sulfur specifically sulfuric acid which is used for mining things like copper and cobalt and guess what those metals are critical for electrical grids electric vehicles electronics the ai data centers so with all that happening guess what it could hit industries like construction energy infrastructure technology manufacturing and we already see ai in this massive bubble this war in iran could be the thing that finally pops it now of course the u.s government is trying its best to intervene and shut this down and sort of make it better as soon as possible in the u.s we do have strategic petroleum reserves which stores about 411 million barrels of oil but that has limits because the maximum rate that the u.s can release oil from the reserve is about 4.4 million barrels per day and that's only a fraction of the potential 17 and a half million barrel global supply gap that's occurring right now so that reserve does help but it's definitely not enough to replace the global production and so this also means that inflation is going to surge from this even if oil doesn't hit 200 a barrel and i'll tell you why in a little bit first of all you have the obvious with fuel prices affecting everything we just talked about that's going to increase the price of everything which is inflation number one but the other thing that people don't consider is this war with iran is already costing us about 1 billion dollars per day right now just the first 48 hours of the war cost us about 5.6 billion dollars according to the congressional budget office and we were already projected to be running at a 1.85 trillion dollar deficit in 2026 and just a 60-day war with iran could add 65 billion dollars in spending to that number plus an additional 1.4 billion in interest payments so we're talking almost 67 billion dollars from just two months of war and that's if it only lasts two months history shows us that that's very unlikely these things tend to drag on a lot longer than anyone thinks or wants it to and guess what the cost doesn't end after the war guys no no no no first of all the government has to borrow money to fund the war which they're doing right now that borrowed money adds to the national debt which means more interest payments in future years so this creates a long-term budget deficit that they have to continue borrowing more for in the future that's why these deficits keep getting bigger because they are borrowing from tomorrow to pay for today that is the strategy that we use in this country and then the tariffs those recently got shot down and there's billions of dollars now owed in tariff refunds that's not going to be helping out even though the tariffs were ruled unconstitutional this is probably the worst time that we can afford to lose that extra money so when you combine the 65 billion in potential war spending plus 74 billion in lost tariff revenue we're talking about almost 140 billion dollars added to the deficit just like that guys just blink your eyes there it is once you get the big picture of this and you see that U.S. government already spends about 33 percent more each year than it collects in taxes and then you see something like this happening this is only going to make it worse so rest assured all of us are going to be paying for this war whether you think it's just a few extra cents at the pump right now and it's going to end there you are wrong it is going to be more than that guys they're going to be long-term impacts from the deficit created like we just talked about and also we are likely to see more short-term impacts if the price of oil continues to go up and you got to remember too the longer the price of oil remains higher than the more of an impact it's going to have on overall prices and if you've been watching me for a little while you've probably heard me say this in a previous video which is that once you have inflation and once prices go up they rarely if ever come back down because first of all companies see that hey we can get away with charging this amount and people will pay that's the first thing and some companies are able to profit from that increase whether it was necessary to increase the prices or not kind of like what we saw during the pandemic with greedflation and also even if companies do want to lower prices back to where they were they are going to be way more skeptical and hesitant about doing that because once the prices have already gone up and there's still a lot of uncertainty on where their costs are going to go as a business moving forward they are going to keep prices high for the foreseeable future until they can guarantee that they're going to see a reduction in prices for everything that they need in order to sell you a product or a service so this is going to have impacts on us it's already started now and this is just the beginning and one more thing i want to point out about this is don't let the media fool you and tell you well everything was going great until this war with iran started and now x y and z's happening now you know inflation was getting under control now it's not you know prices were stabilizing now it's not the job market was getting better now it's not no they're just going to use this war as an excuse as something to blame like a reason why the economy is not going so great but if you've even half been paying attention then you know that we were already on this trajectory before the war even started and this war is just kind of speeding us up it's putting us on the fast track to the bad economy that we were already headed into but they are definitely going to use this as a scapegoat for everything now like any sort of problem that comes up oh we hit an official recession it's the war oh the job market sucks now it's the war oh we have inflation again well it was getting better but now it's the war they're going to use this as the scapegoat for everything and of course as more economic information comes in and we get updates on this i'll be sure to relay it to you guys so make sure you are subscribed in the meantime if you don't want to wait for my next video to come out check out this one on the screen right over here and i'll see you in the next one