In 1973 and 1979, war in Israel and turmoil in Iran disrupted oil markets, causing rising inflation and a slowdown in Western economies. Decades later, the possibility of conflict emerging in the Middle East could trigger a spike in gasoline prices that looms over the White House.
Last week, fears suddenly became overblown when Israel retaliated against Iran, raising fears of a broader regional conflict. However, at the beginning of this week, oil prices stabilized at 87 USD/barrel.
It was a notably dismissive response from oil markets, especially in light of the threat Iran poses to the Strait of Hormuz, a waterway through which one in five barrels of gasoline is consumed globally. pass by every day.
Crude oil prices have stabilized in the face of this turmoil largely due to events in shale oil fields in North Dakota and West Texas, which have flooded global markets with US oil.
Daniel Yergin, Vice President of S&P Global said: “Shale oil has redrawn the world oil map in a way that most people do not seem to understand… It has not only changed the balance of supply and demand but also geopolitical balance and psychological balance.
| Brent oil price developments |
Two decades ago, the United States produced about 7 million barrels of petroleum per day and consumed 21 million barrels. Gulf states such as Saudi Arabia and Kuwait – which ship oil through the Strait of Hormuz – are among America’s most important foreign suppliers.
Currently, the US produces nearly 20 million barrels of oil per day, nearly equal to its consumption. Imports from the Gulf have plummeted and the US became a net oil exporter for the first time in 2019. The Permian Basin shale in Texas and New Mexico pumps more oil than Kuwait, Iraq or the UAE, three OPEC powerhouses.
The strategic advantages are profound, even for a country looking to transition from fossil fuels to clean energy, analysts say.
A surge in US shale oil production has softened the impact of supply cuts implemented by OPEC over the past two years and helped President Joe Biden’s administration place sanctions on suppliers. levels like Venezuela and Russia, while tightening restrictions on Iran without fear of causing oil prices to rise.
“It’s a big change from where we were in the 1970s,” said Harold Hamm, Chairman of Continental Resources. “If it weren’t for the shale revolution, we would have oil prices at $150.” … We will be in a very unstable situation. It would be terrible.”
Rising shale oil supplies also help US oil continue to shine in Europe after the Russia-Ukraine conflict in 2022, with US liquefied natural gas shipments helping Europe eliminate its dependence depends on Russia’s pipeline gas supply.
The importance of shale oil to the oil market was made clear in 2019, after a devastating drone attack on the Abqaiq crude oil processing facility in Saudi Arabia, central China. headquarters of the country’s oil industry. Crude oil prices rose sharply and then almost as quickly fell again.
“I think that’s when it became clear to me that there had been a great rebalancing,” said Daniel Yergin.
Even so, experts warn that the US is still vulnerable to oil shocks. A full-blown conflict between Israel and Iran, or a major new decline in exports – for example if the Strait of Hormuz is closed – would certainly remove supply from the global market and increase gasoline prices. everywhere in the world.
| Production and consumption of US petroleum products |
The US accounts for about 20% of global demand, because the country depends on large vehicles that are very gas-hungry.
Shale oil remains particularly vulnerable to price fluctuations, some analysts say, making it an unreliable component of the global oil market.
Just four years ago, plummeting oil prices during the Covid-19 pandemic pushed many shale producers to the brink of bankruptcy. President Donald Trump was then forced to ask Saudi Arabia and Russia to cut production to raise oil prices to free up the shale sector – a testament to America’s energy vulnerability.
After the Russia-Ukraine conflict caused oil prices to rise in 2022, President Biden pressured Saudi Arabia for help, urging them to pump more to reduce soaring U.S. gasoline costs.
Shale executives themselves doubt whether drillers can increase supply fast enough to rescue the global economy from a sudden oil shock. Wall Street remains reluctant to fund new drilling campaigns by producers known for their profligacy in recent years.
Meanwhile, the White House’s diplomatic focus is on preventing further chaos in the Middle East.
“We have an election coming up and President Biden’s administration cannot act recklessly or hastily in the region. They are being extremely careful with every step they take,” said Matt Gertken, geopolitical strategist at BCA Research.
President Biden’s administration also said that it is still ready to use the amount of strategic oil reserves it has stored to keep prices stable. At about $3.68/gallon, gas prices in the US may be lower than in other economies but have increased 15% this year.
According to Amy Myers Jaffe, a professor at NYU: “The bottom line is that it is always better for a country to have its own oil… But crude oil prices will increase if there is a market supply shock, which could have an impact. back to American drivers as higher fuel prices and then impact the global market.”
Hac Hien
According to foreign press
