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Being the world’s No. 1 driller isn’t enough to shield the country from the effects of the war.
The Iran war may be happening on the other side of the world, but US consumers are already starting to see the effects.
Average gasoline prices jumped to $3.25 a gallon on Wednesday, according to data from the American Automobile Association — up by 25 cents this week.
Diesel, often referred to as a workhorse of the global economy because of its wide use in freight, power and heating, has soared almost 30% since the conflict began, outpacing gains in crude oil.
Any increase is unwelcome news for President Donald Trump, who has consistently touted lower pump prices as a measure of his success.
Rising electricity bills have already emerged as a major political issue. Now, costlier fuel could pose even more risks for Republicans at the midterm polls in November.
Source: Nymex
To be sure, the US is well-positioned to absorb some of the supply shock caused by disruption to energy exports through the Strait of Hormuz.
The shale revolution elevated the country to its current position as the biggest oil and gas producer, significantly reducing its dependence on Middle Eastern crude supplies.
Under his so-called energy dominance agenda, Trump has pursued even higher production as well as low prices. The US is drilling record volumes of oil and gas. It’s also a net exporter of gas and petroleum, an advantage not enjoyed by many other countries.
The benefits of that privileged position have been on display this week as the disruption to Middle Eastern energy exports sends European and Asian natural gas buyers scrambling. US natural gas prices remain little changed by comparison.
But unlike gas, the oil market is truly global. Being the No. 1 driller isn’t enough to fully insulate the US from the effects of the war.
Trump has already acknowledged the price impact, saying that the US would provide naval escorts to ensure safe passage for tankers through Hormuz and get energy shipments moving again. More measures may follow.
—Will Kubzansky, Bloomberg News
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COMMENTARY: Charting the Widening Impact of the Iran Crisis on Energy Markets