Economic burden may stem from Israel war

SAN FRANCISCO - While the task at hand for the U.S. is to assist Israel in its fight to help create an environment where talking replaces shooting, that task may impact the U.S. economy. 

While Israel is 7,400 miles from here, the consequences, to one degree or another, will affect the American and Bay Area economies. 

The biggest threat to the U.S. economy from the Hamas attack and invasion of Israel is actually 1,600 miles away east at the Straits of Hormuz where, if Hamas supported Iran, blocked it, oil analyst and consultant Andrew Lipow says, 20% of the world's oil would be cut off. Automatically, prices of remaining supplies would skyrocket. "I estimate that if the Strait of Hormuz was shut, that crude oil prices would rise 20 to 30 dollars per barrel and what the means in that gasoline prices would rise 50 to 75 cents per gallon," said Lipow.

Since oil prices are as much political as economic, the danger of sharp rises is real, especially with major exporters and OPEC. Worse, diesel prices would also skyrocket. "High diesel prices are like a hidden tax on the consumer because they go into the cost of delivering all the goods and services that the consumer wants at their home," said Lipow.

Israel's democracy has given rise to a $654 billion economy, one of the most successful in the developed world. Its high-tech industry employs 14% of its workforce and generates 20% of its total economy which includes $50 billion in trade with the U.S., a major reason there are non-stop flights between the Bay Area and Tel Aviv.

In any event, war comes at a brutal cost in lives and treasure. According to Brown University’s Costs of War study, since the 9/11 terrorist attacks, the U.S. has spent and obligated more than $8 trillion U.S. for the wars in Afghanistan, Pakistan, Iraq and elsewhere. While a lot of that national treasure is spent within the U.S. for making military hardware and military pay, a lot of it is literally blown up into smoke.

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But, that is the price both parties have chosen to pay over many administrations; much of it, allowing other nations to defend themselves as we see in Ukraine and Israel today. Or, as President Biden put it today, "There's no justification for terrorism. There's no excuse."

The new costs of defending Ukraine is already at $75 billion. Israel will add a lot to that. That's above and beyond traditional foreign A.I.