Published 7:01 a.m. ET August 25, 2019
The United States has an unsealed warrant to seize an Iranian oil tanker held in Gibraltar.
One week oil is spraying as Iran attacks tankers in the Hormuz Strait – threatening to destroy the global economy. Next month, oil drops because it is claimed that China's demand tariffs and – you guessed it – destroy the global economy. Express these scared stories. They are both bricks in the troubled wall of this bull market.
Tariffs addressed in the previous column. Even with subsequent rises, all threatened and newly enforced tariffs have been only 0.3% of global GDP since 2017. Too small to reverse. Businesses make a proportion of these tariffs. Vietnamese and Taiwanese trade that is declining shows the waiver effect. Relax.
Think about Iran. Today's fear seems scared in the 1970s, when the Arab oil embargo contributed to a global shortage, with stagflation and a rapid recession. We accept that Iran now has the power to stick prices by remembering that huge impact back then.
The oil tanker was arrested from the British Stena Impero Friday at Revolutionary Iran in the Strait of Hormuz. The most recent impetus in a strategic waterway has been the seizure of the ship which has become a flash point in the tension between Tehran and the West. (Photo: Basil M. Karatzas, AP)
But change times. Yes, the Strait of Hormuz chokepoint oil is critical. The Energy Information Administration (EIA) estimates that one fifth of global oil consumption goes through daily. If it stopped, prices would rise dramatically, set around the world. But Iran probably can't close the Strait alone. While the seizure of a British tanker stole headlines, that is one ship among many people who cross the Strait every day. The United States and the British navigators ensure safe passage for the most part.
Then, too, Iran's traffic is not threatening the first time. The Iraqi War “Iraqi War” was hit by oil transport scores. But prices did not jump. Not only was it a fraction of total traffic, but oil production grew outside the Middle East, offsetting the small impact.
This is the history we repeat now – not in the 1970s. In the 1980s, the supply came offset from Europe – the North Sea. Now it comes from areas of U chips like Texas, New Mexico and North Dakota. According to BP annual oil report, 2.2 million barrels per day increased production of U.S. in 2018 – the single biggest rise ever. According to the MTC domestic output has jumped another 1.36 million barrels this year. Unlike producers elsewhere, U. rigs can profit profitably at lower prices, due to huge efficiency gains.
And if I'm wrong? If prices rise? Again, this is not in the 1970s. These days when high oil prices of our economy have gone as low as a disco and a clock clothes. Our economy is now far less energy efficient, thanks to the position of the service sector. In 1970, the heavy industry accounted for 32.1% of annual output, compared to 65.5% for services and 2.4% for agriculture. Now? Heavy industry is only 18.5%, and 80.7% are strong services. Services use less energy than factories. But manufacturing has even reduced energy use in recent years through better efficiency.
Yes, many oil consumes America, and it gets a lot more GDP for every barrel of oil consumed. In 1990, we received $ 13.7 million in adjusted GDP inflation from every thousand tonnes of spent oil. Now it is $ 23.8 million.
The rise of services hinders the emergence of other oil fears: a weaker life last year outside China, India and America show a weak world. In reality, it only represents weaker manufacturing – widely discussed and priced. Meanwhile, services have kept the global economy growing reasonably. They still do now. All of this reminds me of 2015 and 2016, when oil fell to $ 26 per barrel. However, GDP grew in all the US, rising by 2.9% in 2015 and 1.6% in 2016. Only the nations that depended on the oil skirts did not hit.
So do sweat oil swings. They have false fears and prices are now in stock. False factors or negative negatives are always scared. The bull market continues.
Ken Fisher, founder and executive chairman of Fisher Investments, author of 11 books, is one of New York Times novels, and is No. 200 on Forbes 400 list of the richest Americans. Follow him on Twitter: @KennethLFisher
The views and opinions expressed in this column are those of the author and do not necessarily reflect those of the USA on Monday.
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