Sudden, violent, disruptive events in the Middle East cause big oil price jumps and front-page headlines about gasoline prices – don’t they? But, not lately. Like the dog that did not bark, why not?
Russia, one of the world’s three largest oil producers, invaded Ukraine and started a war which has been going for two-and-a-half years now. Europe imposed sanctions on Russian oil and gas supplies and caused re-arrangement of oil and gas supply relationships worldwide. Hamas, an Iranian subsidiary, attacks Israel and initiates Israeli military action in Gaza. Houthis in Yemen, another Iranian subsidiary, supplemented Hamas’ efforts by attacking shipping coming down from the Suez Canal into the Red Sea.
Hezbollah, a third Iranian subsidiary, fired missiles into Israel from its bases in Lebanon. Those attacks increased in recent months. Israeli Defense Forces crossed into Lebanon and are reducing Hezbollah’s ability to threaten them.
Israel killed leaders of Hamas and Hezbollah. Iran fired 160 missiles into Israel. Everybody wondered: How will Israel respond? Reportedly, the Biden-Harris Administration demanded that Israel not attack Iran’s oil export or refining facilities or their nuclear facilities. Israel struck Iranian military, Iran Revolutionary Guard, and weapons manufacturing facilities.
All this turmoil and disruption is in the Middle East, which produces over 30% of the world’s oil.
No big change of oil prices, however. No front-page screaming headlines (or today’s online equivalent) about oil or gasoline price increases. Television talking heads do not mention oil prices. They are down a bit.
After years of oil and gasoline price sensitivity to Middle East instability, what is different? The United States oil industry rode to rescue the world economy from its hostage status to Middle East and Russian producers. United States oil production increased from about five million barrels/day (mb/d) to over 13 mb/d over the past 20 years. The U.S. is now the world’s largest oil producer. That eight mb/d increase is more than twice the Iranian production rate and is all actively marketed. That production increase developed a five mb/d surplus capacity in OPEC producers alone.
The world should be grateful. Iran’s production could be taken completely offstream without a critical effect on oil supplies or price. Unfortunately, China is a large oil importer and also benefits.
Why would the Biden-Harris Administration demand Israel not strike Iran’s oil export or refining facilities? This raises the question again as to why the Obama-Biden and Biden-Harris Administrations have been so supportive of Iran, one of the United States’ major adversaries, to the point of protecting them. These Administrations have paid Iran over $100 billion and neglected the sanctions against Iranian oil exports. Current Iranian oil exports bring Iran $40-$45 billion dollars annually. Iran uses these funds to help their subsidiaries commit mayhem. As noted above, OPEC has plenty of spare capacity; several of its members would be happy to replace Iran’s exports in world markets.
The Biden-Harris Administration has a history of executive orders, actions, regulations, policies, and tax proposals indicating they have little knowledge of the industry and want to penalize it. Biden was so sensitive to possible supply shortages causing gasoline price increases prior to the 2022 mid-term elections that he released hundreds of millions of barrels of oil from the Strategic Petroleum Reserve. That ranks as one of the most short-sighted and self-serving actions ever taken by a president. Less than five percent of those withdrawals have been replaced.
With Iran’s strong support of its subsidiaries spreading mayhem in the Middle East, one must wonder why the Biden-Harris Administration continues to support and protect it. The result is conflict, instability, war, and misery throughout the Middle East.
