Video | Economist: The US-Iran Conflict Will Create "Ripple Effects" on the US Economy

On May 4 local time, U.S. President Trump stated that once the conflict between the U.S. and Iran ends, oil prices will "drop rapidly."

U.S. President Trump:

Most people are wrong. They think oil prices will rise to $300 a barrel. But now it's only about $100 a barrel. I believe oil prices will continue to fall, and after the conflict ends, they will drop significantly and very quickly to unprecedented levels.

However, two U.S. economists interviewed by ABC on the same day believe that the impact of the U.S.-Iran conflict on the U.S. economy "will not disappear in the short term" and will create "a chain reaction."

U.S. Scholar: Pressure on U.S. Oil Prices Still Exists

Karen Young, Senior Research Fellow at Columbia University's Center on Global Energy Policy

Oil prices may continue to rise, largely due to the conflict lasting over nine weeks. We have now exhausted all products in transit before the conflict, and we have started to tap into reserve resources. So people are realizing that there is a shortage of energy supply, especially refined products.

The impact that Southeast Asian countries experienced first is now also appearing in the U.S. In terms of the magnitude of price increases, gasoline prices in Southeast Asian countries have risen by about 37%, while in the U.S. it has risen by about 42%. So the impact of this supply tightening that we are feeling is equivalent to or even exceeds that of the Southeast Asian countries that were affected first.

U.S. Scholar: The Conflict Will Bring "Chain Reactions" to the U.S. Economy

Diane Swonk, Chief Economist at KPMG (U.S.):

Generally speaking, when oil prices rise, for example, the price of gasoline at gas stations, the price increase is like a rocket launch, while the price decrease is like a feather falling. I think this is a problem we need to address.

Most importantly, this is not just an "oil shock," but also a "supply chain shock." Global supply chains are being disrupted. From a yearly perspective, we will feel the "chain reactions." This will further drive up inflation.

For American consumers, the biggest issue is not just travel; they can reduce travel in the context of high oil prices. But inflation is also occurring in the food and everyday consumer goods sectors. Farmers have already been complaining about diesel prices, and more importantly, fertilizers and chemicals used in food production are also rising in price, compounded by transportation costs. This creates significant difficulties for consumers.

We refer to the prices of these essential products as "consumer-sensitive prices," covering the most basic food, travel, and housing, which are very important for ordinary families.

U.S. Scholar: Energy Supply Difficult to "Recover Quickly"

Karen Young, Senior Research Fellow at Columbia University's Center on Global Energy Policy:

This issue does not have a simple solution. First, it is necessary to persuade ships and their insurance companies to enter ports for loading. Extract the backlog of crude oil inventory. Previously, oil wells were closed in Iraq and Kuwait, and now the same is happening in Iran.

Only after these ships finish loading can oil wells and refineries be restarted. This will take about three to four months, according to information provided by executives from Kuwait Oil Company. After that, the actual throughput of the strait must also be increased.

It is unrealistic to expect daily throughput to quickly return to the normal level before February 28, which is about 120 ships per day; this will take a long time.

Source: Global Information Network of the Central Radio and Television Station