From the press release:
From December 2006 to March 2007, Heritage Foundation scholars conducted a computer simulation and gaming exercise that examined the likely economic and policy consequences of a major oil disruption in the Persian Gulf. The exercise utilized a realistic scenario, state-of-the-art macroeconomic modeling, and a knowledgeable team of subject-matter experts from government, business, academia, and research institutes from around Washington, D.C.
This project was a proof-of-principle investigation that combined computer modeling and gaming to capture how U.S. decisions during a crisis might affect how global energy markets and the U.S. economy adjust to sudden and significant disruptions of oil supplies. In this scenario, the United States responded to a crisis precipitated by an attempted Iranian blockade of the Strait of Hormuz.
They found that under worst-case circumstances:
- Real (inflation-adjusted) gross domestic product (GDP) would fall by over $161 billion in the fourth quarter of 2007;
- Private non-farm employment would decline by over 1 million jobs by the middle of 2008; and
- Real disposable personal income would be more than $260 billion lower by the fourth quarter of 2007. MORE