The Iranian Oil Bourse: a weapon whose time has passed.

I hear much wailing and gnashing of teeth over the soon-to-be extinct US geopolitical position based on the Iranian Bourse.

Hate to say it, folks, but it's a really dumb play.

First off, the US' energy consumption measures roughly the equivalent of 18 billion barrels of oil. (See the WSJ 2/3/06, "Crude Awakening," by Peter Huber) Of that, 7 billion comes from oil, and the US and Canada jointly account for 80% of that supply. So the President's pledge about removing dependence upon 75% of the world's oil is actually quite reasonable, involving a roughly 5% difference.

Now the naysayers will jump all over my butt saying that this isn't what matters. And to an extent, they're right... and to an extent they're wrong.

1. They're wrong to the extent that we are a simple economic equation away from simply moving off oil completely, and the existence of the bourse -- complete with its threat of dropping the dollar into a trading range loosely equivalent to Moldova's, only stacks the equation ever-faster in favor of getting out into Fischer-Tropf, coal-based methanol and biomass-based ethanol. We learned from Katrina that we can survive three and even four-dollar gas in the short term... and under current circumstances, that's all it would be.

2. What is the result of making the US no longer the major reserve currency?

• Well, for starters, the dollar bottoms out -- this makes our exports more competitive, in an economy where most of Europe and Asia's economies are tooled for exporting to us, with relatively little accounting for domestic demand.
• Following that, the Euro actually manages to get on its feet and stimulate some growth. Geopolitically, this is good for America.
• Third, given the immediate threat of a recession, Congress cuts taxes further, and rates drop through the floor again. OR, it doesn't, and a short period of inflation effectively solves all of our short-term domestic debt problems (though it means that the folks with "affluenza" barely making their mortgage will be hosed). But the former is much more likely, because politics aside, tax cuts are known to be what has allowed the US to survive a series of economic catastrophes, including 9/11, Enron, Katrina, etc., that otherwise would have been devastating.
• Fourth, the deficit will have to come screeching under control, meaning that a lot of government programs get the axe... since it's well-known that taxing your way out of a recession is a non-starter.
• Fifth... on top of all that, the US will be forced to become more competitive than it already is. The US economy is good at that.

So, what's the catch? The US takes a short-term hit -- takes it on the chin, but is back in the game after no more than a standing 8-count. The rest of world loses its export advantage to the US (and this constitutes a serious threat to China's stability, if it can no longer continue to export its way into economic maturity), Europe catches a mild structural economic upswing, and the demise of the petrostates' economic legs gets radically accelerated.

We can survive the hit... Iran's "me too" contingent using the bourse get a benefit, and the long-term threat hanging over all of the petrostates accelerate to a short-to-medium-term certainty.

This is the best strategic thinking the mullahs can come up with?

(Note: this is assuming that those who are all excited over the threat to the dollar are right. There are folks out there who think even that is overblown.)