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CNN Live At Daybreak
Many Concerned About Impact War Against Iraq Would Have on U.S. Economy
Aired October 30, 2002 - 05:36 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: The "New York Times" is reporting the Iraqi leader and his top henchmen, including two of his sons, have allegedly committed actions that the U.S. and humanitarian groups view as genocide and crimes against humanity. They could face charges if the Iraqi government is toppled.
Many here in the United States are concerned about the impact a war against Iraq would have on the U.S. economy.
Our Brooks Jackson looks at the possibilities in this segment of our week long series entitled "Life After War."
(BEGIN VIDEOTAPE)
BROOKS JACKSON, CNN CORRESPONDENT (voice-over): If another Gulf War comes, what of oil and what of the economy that depends on it? Nothing good.
JAMES PLACKE, CAMBRIDGE ENERGY RESEARCH: When ordinance starts going off in the Middle East, oil prices go up, gold prices go up and equity prices go down. That's just almost a given.
JACKSON: Look at recent history. 1979, the Iranian Revolution, oil shot up to more than double today's prices, adjusted for inflation. Two recessions eventually sent U.S. unemployment to nearly 11 percent, worst since the Great Depression. Then the Gulf War in 1990 and '91, oil prices shot up again. A year later, the jobless rate topped out at 7.8 percent.
But would it be that bad this time? Not likely.
DAVID WYSS, STANDARD & POOR'S: The most likely outcome is that we win the war fairly quickly with minimal disruption of oil supplies. It would be a very modest blip on the economic landscape.
JACKSON: Among the factors that would cushion the economic blow, there's much less oil at stake this time. Iraq now experts only about one million barrels a day, which others could make up easily. The U.S. strategic oil reserve alone holds enough oil to close the gap for well over a year. And a more energy efficient, more service-based economy needs relatively less energy. Americans, who used to spend about eight percent of their income on energy, now spend only four percent.
So a short war would hardly be felt. PLACKE: You would notice it but by the time it began to creep into the retail level, it would already be over. So there would be really kind of minimal impact.
JACKSON: But what if? What if a war goes badly, dragging on and on? What if war somehow takes Saudi and Iranian oil off the market, too, causing oil prices suddenly to double and stay high month after month? And what if war brings new terrorist attacks on the U.S., damaging consumer confidence, making them afraid to spend?
Economist David Wyss.
WYSS: That means unemployment getting up over seven percent, maybe up to eight percent.
JACKSON: Under those assumptions, Standard & Poor's' computer model shows two million more Americans thrown out of work, inflation soars, higher prices for everybody. The Consumer Price Index goes up 4.8 percent and the stock market down. The S&P 500 loses a third of its value, another huge hit to retirement accounts.
(on camera): Wyss himself calls his bad case scenario unlikely and those who buy and sell oil every day in futures markets are betting billions of dollars on a short war or none at all, with little effect on prices. In fact, they're betting prices will go down.
Brooks Jackson, CNN, Washington.
(END VIDEOTAPE)
COSTELLO: And we're taking an in depth look at this subject all week long. Tomorrow in the 5:00 Eastern hour, we'll look at what war with Iraq will do to the resources in the United States war on terror.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
U.S. Economy>
Aired October 30, 2002 - 05:36 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: The "New York Times" is reporting the Iraqi leader and his top henchmen, including two of his sons, have allegedly committed actions that the U.S. and humanitarian groups view as genocide and crimes against humanity. They could face charges if the Iraqi government is toppled.
Many here in the United States are concerned about the impact a war against Iraq would have on the U.S. economy.
Our Brooks Jackson looks at the possibilities in this segment of our week long series entitled "Life After War."
(BEGIN VIDEOTAPE)
BROOKS JACKSON, CNN CORRESPONDENT (voice-over): If another Gulf War comes, what of oil and what of the economy that depends on it? Nothing good.
JAMES PLACKE, CAMBRIDGE ENERGY RESEARCH: When ordinance starts going off in the Middle East, oil prices go up, gold prices go up and equity prices go down. That's just almost a given.
JACKSON: Look at recent history. 1979, the Iranian Revolution, oil shot up to more than double today's prices, adjusted for inflation. Two recessions eventually sent U.S. unemployment to nearly 11 percent, worst since the Great Depression. Then the Gulf War in 1990 and '91, oil prices shot up again. A year later, the jobless rate topped out at 7.8 percent.
But would it be that bad this time? Not likely.
DAVID WYSS, STANDARD & POOR'S: The most likely outcome is that we win the war fairly quickly with minimal disruption of oil supplies. It would be a very modest blip on the economic landscape.
JACKSON: Among the factors that would cushion the economic blow, there's much less oil at stake this time. Iraq now experts only about one million barrels a day, which others could make up easily. The U.S. strategic oil reserve alone holds enough oil to close the gap for well over a year. And a more energy efficient, more service-based economy needs relatively less energy. Americans, who used to spend about eight percent of their income on energy, now spend only four percent.
So a short war would hardly be felt. PLACKE: You would notice it but by the time it began to creep into the retail level, it would already be over. So there would be really kind of minimal impact.
JACKSON: But what if? What if a war goes badly, dragging on and on? What if war somehow takes Saudi and Iranian oil off the market, too, causing oil prices suddenly to double and stay high month after month? And what if war brings new terrorist attacks on the U.S., damaging consumer confidence, making them afraid to spend?
Economist David Wyss.
WYSS: That means unemployment getting up over seven percent, maybe up to eight percent.
JACKSON: Under those assumptions, Standard & Poor's' computer model shows two million more Americans thrown out of work, inflation soars, higher prices for everybody. The Consumer Price Index goes up 4.8 percent and the stock market down. The S&P 500 loses a third of its value, another huge hit to retirement accounts.
(on camera): Wyss himself calls his bad case scenario unlikely and those who buy and sell oil every day in futures markets are betting billions of dollars on a short war or none at all, with little effect on prices. In fact, they're betting prices will go down.
Brooks Jackson, CNN, Washington.
(END VIDEOTAPE)
COSTELLO: And we're taking an in depth look at this subject all week long. Tomorrow in the 5:00 Eastern hour, we'll look at what war with Iraq will do to the resources in the United States war on terror.
TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com
U.S. Economy>
