Oil And Iran

The collapse in oil prices will cause hard times for the current rulers of Iran, which is good news for Obama:

Abevy of foreign policy experts are pressing Barack Obama to move quickly on his promise to "engage in aggressive personal diplomacy" with Iran.

He'd be better off first taking a long, deep breath and allowing Iran's economic crisis to take its toll on the mullahs before getting down to serious business.

The political landscape has shifted dramatically in Iran in the last few months, handing the United States policy options it hasn't had since the 1979 revolution. President Mahmoud Ahmadinejad's populist expenditure policies, coupled with the unprecedented collapse of the oil market, have driven Iran into an economic tailspin. The result is that Iran is more vulnerable to focused economic sanctions than it has been in 30 years.

...But it's lower oil prices that are really squeezing Tehran. When oil was at its peak, about $150 a barrel, the government spent the windfall as if there were no tomorrow. Now Iran finds itself in a precarious financial position with oil at about $46. A decline in prices to the $30-$40 range for a year or two will be catastrophic for the regime: Either the poor have to go without basic necessities or cronies will have to be heavily taxed.

If Obama takes stock of these developments, he'll realize there is no need to rush to engage Iran. Iran is no superpower, after all. Its GDP is less than 2% of that of the U.S. Its military is puny; Iran fought Saddam Hussein for eight years and could not advance even 100 miles into Iraq, so it hardly represents a military threat to the United States or Israel. The large U.S. military presence in the region can easily keep Iran in check. Even if Iran is striving to develop nuclear weapons, it is at least three years away. All Iran can do is fan the flames against U.S. interests through surrogates such as Hezbollah and Hamas.

One more reason to smile while filling up at under $2 a gallon.  But while smiling, do consider the benefits of a revenue-neutral gasoline tax.(Yes, it's Al Gore II - Legacy In The Balance!)  At current prices, folks still reeling from the $4/gallon prices of last summer would find the sticker shock of, for example, a $0.50 per gallon tax to be tolerable (IMHO), if offset with tax cuts elsewhere.  However, such a tax would be one more factor reducing oil demand and sticking it to the mullahs.

Comments

[clarice]

And, given the multiplier effect, another fuel tax would put us closer to the poor folks in Tehran.We could really feel their pain.

Of course, there'd be the offset to that pain--the rosy thought of all the good that Congress would do with those new revenues.

Iran's aggression and nuclear weapons arsenal depend these days less on how fat its civilian population is--The poor economy and a diseffected population are not the check on Imasmadasahatter that I'd wish if I lived in Tel Aviv or anywhere in the MiddleEast.

[bgates]

Even if Iran is striving to develop nuclear weapons, it is at least three years away.
We can't possibly know enough about the technical state of a secretive military program on the other side of the world to say that for an absolute fact, and even if we could, no one older than nine can act like three years into the future is an incomprehensibly long time. How are people who talk like this allowed to refer to themselves as realists?

[kim]

Oh, yeah, tax us to punish them. An old recipe.
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[Chris]

Revenue neutral? Not sure how taking 50 cents/gallon out of the consumer's pocket could be considered neutral. The feds already take nearly 20 cents and the states take theirs too.

Good to see the mullahs, Chavez and Putin sweating while oil craters. There is a silver lining in almost any problem.

[matt]

The good news is that Chavez will be short on cash to stir up trouble as well.....

The Rafsanjanis in Iran will also take it in the shorts...the Ayatollah and his kids has been siphoning off probably 25% of the nations wealth into the family coffers for decades....maybe they'll be forced to relocate to Switzerland if the country continues to decline. Even in Iran, religion can pay very well.

[MayBee]

I guess I'll believe a gas tax is a great idea when I hear people earning the median income or below advocating for it.

[clarice]

I think I could make a better argument that making Iranians richer would better stem the rush to nuclear weapons--try getting smart rich kids to become nuclear scientists when they'd rather be dancing and shopping for armanis.

[MayBee]

I'm happy to see the price of airline tickets going down.
High gas prices affect more than just the auto driving consumer. Michigan's small tourist towns (big with drivers and boaters) looked pretty struggle-y to me last summer.

[MayBee]

clarice- good point. How long until we see the argument that not buying oil from the ME has just created more terrorists?

[Soylent Red]

bgates is right. Our HUMINT on Iran is very sparse, and the country with the most people inside, Israel, suggests that Iran might be a year away.

The oil revenue Iran generated over the last two years is more than enough to finance the remainder of the project, and the Russians are passing goodies under the table in return for access to Iranian oilfields.

Finally, and most importantly, the Iranian people are cowed and will not rise up even in economic hardship. The nuclear program is not only about acquiring a weapon, but about being considered a big boy on the world stage. It's a matter of national pride, and the people support it.

Barry might be Teleprompter Jesus, but he doesn't draw enough water to stop Iran, nor does Hillary. And neither will get it in the next three years (or two or ten). By electing this ponce, the American people just gave approval for Iran to become a nuclear power.

Oh! Let's also not forget how helpful Iran has been to us in Iraq, when we consider our future prospects in their other next door neighbor, Afghanistan.

Maybe if we let them have a nuke, they'll behave.

[Barney Frank]

I am foursquare in favor of revenue neutral carbon taxes which are offset by cuts in payroll and income taxes, until I consider the VAT tax of Europe which is around 17% AND is in addition to onerous income taxes.
A person who believes that the Feds would lower our other taxes for more than the blink of an eye never ran into a pea and thimble man at the carnival.
I would support such a proposal only on one condition; any politician or civil servant subsequently found to be responsible for raising the offest income and payroll taxes would be subject to entry as a pedestrian in a nationwide Death Race 2000 scenario. At least that way we'd get our money's worth out of our new carbon tax.

[bgates]

Don't everybody freak out about TM's proposed $0.50 gas tax. He's just throwing that out there to make whatever budget proposals the SantosObama team comes up with look incredibly reasonable.

[Rick Ballard]

"At current prices, folks still reeling from the $4/gallon prices of last summer would find the sticker shock of, for example, a $0.50 per gallon tax to be tolerable (IMHO), if offset with tax cuts elsewhere."

Oh goody. A Pigovian "solution" with an extra layer of complexity to be manipulated by the majority in Congress. It tales a lot of Ivy League training to come up with this type of scheme. Perhaps the tax cut "offset" could be used to give Blue Hell leeches another reason not to look for a job? Maybe the "offset" could just be ignored and the revenue used to provide an interest rate subsidy to the newly FICO collared flakes who defaulted on their previous loans?

Everybody try real hard not to think about what a permanent reduction in demand does to the length of time reserves will last and the ultimate impact of increasing the productive life of reserves controlled by muslims and protocommies. After you're done not thinking about that, try not to think about what building 150 pebble bed reactors would mean in terms of energy independence. It may seem difficult to do at first but our finest economic minds manage to achieve the goal every damned day.

[Patrick R. Sullivan]

Revenue neutral? Not sure how taking 50 cents/gallon out of the consumer's pocket could be considered neutral.

By offsetting it with an equal tax reduction on something else. It's basic econ; tax consumption, not production. Plenty of support for the idea in the professional literature.

[clarice]

But, Rick, think how good this proposal will be for my DC Sharpened Pikes business.

[Danube of Thought]

Oil has fluctuated between $9 and $179 in recent years, and no one can say what it will do in 2009 or 2010. One can say with absolute certainty, however, that if a 50-cent tax is imposed, it will remain in place ad infinitum. Remeber the telephone tax that was levied to help fund our efforts in WWI? It was only repealed (partially) in 2006.

Some day when I have the time I'm going to put together a compendium of various experts' predictions about how far away such-and-such a country was from producing a nuclear weapon when we discovered that they had actually produced one. It's as sustained a record of error as that compiled by the population-bomb goofballs.

I love the tone adopted by this clown in the LA Times. Iran is no military threat to the US--well, unless you want to talk about nukes. And then it's "even if" they're trying to produce one, as if there is reason to doubt it. Pure crapola.

Within the hour I'm headed off to lovely Tiburon for three days, folks, and will be in radio silence. So if you see my moniker here before Sunday evening you'll know it's a phony.

OT: Anyone who doubts The One is blowing a joint in that photo should take a close look at those hood eyes. Dude is higher than Piccard's balloon.

[JM Hanes]

"All Iran can do is fan the flames against U.S. interests through surrogates such as Hezbollah and Hamas."

Oh, well, I can just relax then.

[Chris]

"By offsetting it with an equal tax reduction on something else. It's basic econ; tax consumption, not production."

Ok. If that's the case then the idea has some merit. What is/are the corresponding cut(s)? I'll read the link but I can't help thinking that there isn't much will in congress to do anything to reduce some other tax. Not to mention all the unintended consequences.

[Jane]

OT: IT'S A GIRL! Evan Grace born a few minutes ago to my niece-in-law. Yippie!

[JM Hanes]

PatrickRS:

"It's basic econ; tax consumption, not production."

Thanks. I was having trouble figuring out TM's shorthand on this one.

[clarice]

DoT you could start that list of sidesplittingly wrong predictions with Pawkeestawn.

[clarice]

Congrats, auntie.

[Jane]

That's GREAT Auntee - and not pronounced like the bug - and thank you! I so wanted a girl!

[clarice]

Tell her to stay away from Medea.Her Code Pink is just investing in Iran.
http://sweetness-light.com/archive/code-pink-goes-into-business-with-iran
She is on Chavez' payroll..I suppose he's the ultimate funder.

[Barney Frank]

By offsetting it with an equal tax reduction on something else.

And the offsetters would be Nancy Pelosi and Harry Reid. Fox, meet chicken.

[fdcol63]

" ... By electing this ponce, the American people just gave approval for Iran to become a nuclear power. ..."

No. I think it will force Israel to "go it alone" against Iran after BHO takes office, or more likely, to attack Iran before the inauguration while they can still get tacit or covert support from the Bush administration.

The clock is ticking.

[MayBee]

Yay! A baby! And born in time for this year's tax deduction.

Great name!

[bad]

Congratulations Jane!! A beautiful name for a beautiful baby.

Ditto on the tax deduction...

[sbwaters]

That's GREAT Auntee

My sister refused to be called aunt... which is why she is know to her niece and nephew as Uncle Nancy.

[Ken Hahn]

Offsetting cuts are a wonderful idea, except that they never work. Either they are promised but never made ( see GHW Bush and the Congressional Democrats ) or they are almost immediately raised ( see the current Democrats in California ans Schwartzenegger ). Revenue neutral doesn't happen. Politicians want more money and they will play word games to get it.

Raising any tax for any reason just gives politician more money which they will immediately use to buy votes.

[Porchlight]

Congratulations, Jane! My great-aunts on my dad's side were always known as Auntie, and my girls continue the tradition with my dad's sister, after whom my younger dd was named.

Girls are so much fun - think of all the cute little baby things you can send!

[Soylent Red]

The clock is ticking.

27 December.

[Jane]

My sister refused to be called aunt... which is why she is know to her niece and nephew as Uncle Nancy.

That's great. I am very close to my nieces and nephews. I've always loved being called "auntee Jane", because when they are little they think it is my name. It's my very favorite name. That's what Amy's kids call me and every time I hear it, it melts my heart.

[Jane]

That's adorable Porchlight!

[Depressed Atlas]

"Remember the telephone tax that was levied to help fund our efforts in WWI? It was only repealed (partially) in 2006."

Not to be picky, but it was created in 1898 to pay for the Spanish American War!

[Patrick R. Sullivan]

And the offsetters would be Nancy Pelosi and Harry Reid. Fox, meet chicken.

The two of them together don't have the intellectual horsepower of Obama's CEA Chair, Christina Romer. Who, along with her husband, recently authored a paper detailing the anti-growth power of tax increases.

[bad]

I like being called Aunt as well, and Mama, Mom, Mother, Mumsie....

My kids have spent years coming up with hilarious names for Mr. bad and I when we become grandparents, although it's hard to beat Grandma, Grandmamma, Grandmother and Granny.

[bad]

Wow, that's encouraging, Patrick.

[clarice]

Soylent, you really think Dec 27 is the day of no nuke Nasrim.

[RichatUF]

DoT-

Where the predictions of nuclear proliferation were a bit wide of the mark:

Brazil and Argentina

North Korea

Pakistan and India (mostly the 1998 nuclear tests, it was known for sometime they were developing weapons)

South Africa (developed full functional nuclear weapons capability; the DeClerk regime de-nuclearized through the IAEA to keep the weapons out of the hands of the ANC)

Iraq (post-Gulf War 1 clean up; it was discovered they had substantial nuclear resources and had begun experimenting with LIS technology)

Lybia (the program had been rumored, however, the 2003 roll up uncovered the depth)

South Korea (experimented with spereation techniques, produced small quantities of plutonmium and enriched uranium (forget if it was in the late 80's or 90's) but the tests were recently uncovered)

I could toss in France, Israel, Iran, China, Russia, and the United States as well but the ones above sort of prove the point. IIRC some 70 countries have or are developing nuclear power-I feel so much safer now that we have "Winnie the Pooh" deep thinkers running out defense and foreign policy establishments.

[TM]

I sense a certain skepticism on the tax hike here "offset" by tax cuts elsewhere. Maybe as a pot-sweetener the tax proceeds could be used to fund the General Motors bailout?

Just thinking out loud here...

[glasater]

TM--you are a very thought provoking writer but you are just so wrong on "taxing here and off-setting there". You are thinking that tax policy can direct human behavior. That is what the D's think all the time.

As far as the auto bailout is concerned--it was the UAW who rejected the Corker plan and pheh on them for it.

[RichatUF]

glasater-

You are thinking that tax policy can direct human behavior.

If it changes incentives, doesn't it change behavior. A $.50 increase in the federal gas tax isn't big enough to substantially reduce demand though, but it might reduce lower wage employment. It took gas getting over $3/gal to reduce driving (the side effect of $3-4/gal gas over the summer was the largest reduction of traffic accident fatalities ever [Maybe Bush should have used that: Higher Gas Prices, Safer Drivers]).

A tariff on OPEC oil and a subsidy on non-OPEC oil would probably work out better, but would probably run afoul of the WTO.

[glasater]

Rich

The market made incentives change.
I just don't want the government involved in changing human behavior.
Choice is what I'm about not having the government with a hammer over one's head.

[clarice]

TM:Maybe as a pot-sweetener the tax proceeds could be used to fund the General Motors bailout?

Just thinking out loud here...

just funning is what you're doing...and stirring the pot

[kim]

The fumes are intoxicating, or toxic.
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[sophy]

Welcome to our game world, my friend asks me to buy some Metin2 yang .