Unless the US goes fully energy-isolationist (a prospect that’s neither advisable nor technically feasible), events overseas are going to affect how much we pay for our oil.
It’s easy to get carried away with the new optimism over America’s energy future as it rides a wave of shale oil and gas production. We’re now imagining a world in which the US is a net oil exporter, which would have been unimaginable just ten years ago. Having more oil and gas isn’t just good for American industry (though it certainly is that, as many manufacturers are enjoying cheaper energy prices); it also strengthens a sense of American energy security, which is less empirically measurable but perhaps more important. That is, decreased dependence on foreign sources of oil gives the US more breathing room in foreign policy.
The oil markets have a war face on. The price of benchmark Brent crude has spiked on fears that military intervention in Syria could lead to a wider regional conflagration. A barrel of [European benchmark] Brent crude cost less than $99 at the end of June; this morning the price surpassed $117 ….
The U.S. may not be immune to the effects of this. Already, [US benchmark] WTI crude traded on Nymex is at an 18-month high above $110 a barrel.
It’s not just worries of a Syrian intervention that are driving prices up. Libyan oil exports are currently at a paltry 10 percent of capacity. The FT‘s Lex blog considers the chaotic aftermath of Qaddafi’s demise to be more important to the global price of oil than the violence in Syria. After all, Libya produced nearly 2 percent of the world’s oil last year. Nigerian oil exports are also a mess, hitting a four-year low as the country’s oil industry struggles to deal with brazen theft, sabotage, and managerial incompetence.
No matter which country—Syria, Nigeria, or Libya—is the chief culprit for spiking oil prices, the fact remains that events abroad are affecting the both the global and the American benchmark prices for oil. An excellent piece from Gal Luft and Anne Korin, run in The American Interest last year, described why the whole idea of American energy independence is folly, and its predictions are being proven this week. More American oil might soften price spikes, but unless the US goes fully energy-isolationist (a prospect that’s neither advisable nor technically feasible), events overseas are going to affect how much we pay for our oil.