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Hail Shale: Turmoil Abroad Not Yielding Pain At US Pumps – So Far

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Darren Goode, Politico

A strange thing happened in the past few months as Ukraine battled with Russian-backed separatists, rockets flew over Israel and much of Iraq fell to Islamist insurgents: Gasoline prices for U.S. motorists stayed pretty much flat. It’s another sign of the unexpected changes wrought by the shale boom.

Marty Mascio of Pembroke Pines, Fla., selects a grade of gasoline.

The price at the pump has even fallen in the past week. | AP Photo

The price at the pump has even fallen in the past week, even after Malaysia Airlines Flight MH17 exploded over Ukraine and Israel sent ground forces into Gaza. And while the per-barrel price of domestic crude oil ticked upward following Thursday’s double dose of bad news, it’s still slightly cheaper than it was a month ago.

The mismatch between trouble abroad and pain at the pump is a sharp turnaround from most of the past four decades, in which fuel prices gyrated in response to events from the fall of the shah to the U.S. war in Iraq. It’s yet another sign of the unexpected changes wrought by the U.S. energy boom, which has turned the United States into one of the world’s largest oil producers and the biggest producer of natural gas.

Besides the latest turmoil in Ukraine, Israel, Iraq and Syria, prices have also stayed steady even as oil is taken off the global market because of a combination of unrest in Libya and Nigeria and sanctions against Iranian oil exports. That may have been unthinkable just a few years ago, experts say.

“I shudder to think of the price of oil if U.S. production hadn’t come on as strongly as it has the last two or three years,” said Ed Chow, a senior fellow at the energy and national security program of the Center for Strategic and International Studies.

The daily losses in the global oil supply tied to Iran, Libya and Nigeria “have been almost perfectly offset” by the rise in U.S. oil production, said Jason Bordoff, director of Columbia University’s Center on Global Energy Policy and a former Obama administration energy adviser at the National Security Council. The center is researching the reasons for the relative calm in global oil markets and the effects of U.S. shale oil production.

Jim Burkhard, head of oil market research at IHS Cambridge Energy Research Associates, had much the same assessment.

If you were to look solely at the trouble in oil-rich North Africa and the Middle East, “you’d think, gee, prices should be rising, should be higher,” Burkhard said. But the U.S. boom “has been so big and so massive that if you were to look at that alone, you’d say, gee, prices should be lower than they are now.”

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