World Conflicts and the US Economy – Professional Tax Services

Our economy has struggled somewhat due to the consequences of COVID-19, invasion of Ukraine by Russia, rising interest rates, and increasing debt. Thus far, the effect on the US economy has been rather minimal. However, should the conflict in the Middle East escalate, danger for the US economy may lie ahead.
The World Bank’s Commodity Outlook Market has stated three scenarios that could cause a disruption to the oil supply and intensify inflation should an intensification in the Middle East occur. The three scenarios state:
1) In a “small disruption” scenario, global oil supplies would be reduced by 500,000 to two million barrels per day—roughly equivalent to the reduction seen during the Libyan Civil War in 2011. Under this scenario, oil prices would range between $93 and $102 a barrel.
2) In a “medium disruption” scenario—roughly equivalent to the Iraq War in 2003— global oil supplies would be reduced by three to five million barrels per day, driving oil prices up to between $109 and $121 a barrel.
3) In a “large disruption” scenario—comparable to the Arab oil embargo of 1973, global oil supplies would shrink by six to eight million barrels per day, driving up prices to between $140 and $157 a barrel.
The third scenario would likely entail direct intervention between Iran, Israel and the United States and could lead to a broader war. Should we experience this, we could encounter gas prices soaring well beyond $6 per gallon here in California. Thus, it could bring about a major disruption to the supply chain, which consequently would cause rising food shortages and escalating prices for food and other goods and services.
As of now, the Federal Reserve is not altering its recent trend. Therefore, they will likely continue increasing interest rates. However, if the Middle East conflict worsens, this could spawn a change in its plans.
We urge everyone to pay attention. Consider meeting with your tax or financial advisor to best ensure you will endure this potential cataclysm should it occur. This could include revising your tax plan and more. We offer our clients unlimited complimentary tax planning and monetary advice.
Professional Tax Services is a locally owned provider serving over 3,500 local residents and businesses. For more information, call 661-259-1967 or visit www.scvprotaxservices.com.