Should President Donald Trump walk away from the Iran Deal, global gas prices will likely rise as volumes of Iranian crude get siphoned away from the international market, benefiting U.S. shale producers.
The White House faces a May 12 deadline on whether to remain committed to the the 2015 Joint Comprehensive Plan of Action. Trump will be making his decision on Tuesday at 2:00 p.m. EST, he announced via Twitter, with experts widely predicting him to withdraw from the Obama-era agreement.
Throughout the 2016 campaign and into his presidency, Trump has remained extremely critical of the deal brokered between Iran’s government and numerous world leaders, which calls on the Islamic country to disband its nuclear program in exchange for a lifting of economic sanctions. The president has referred to the deal as “ridiculous,” “insane” and “horrible,” among other pejoratives. A host of European leaders have lobbied the president to remain in the deal, whereas Israeli President Benjamin Netanyahu has served as the most vocal critic.
Aside from the geopolitical implications, withdrawing from the international agreement would also greatly impact the United States shale industry — for the better.
Iran currently exports around 2.6 million barrels a day. Reimposing sanctions on the Iranian regime could shelve an estimated 200,000 to one million barrels of crude oil per day, depending on what exactly Trump does and how European buyers respond. Such a development could add $7 a barrel to the global prices, furthering the work of OPEC, which has worked to limit production and artificially raise the price of oil.
The American energy industry, for its part, has been experiencing a shale oil boom in recent years. Thanks in large part to the implementation of hydraulic fracturing, natural gas production in the U.S. has skyrocketed, surpassing other leading world producers of oil and natural, and establishing itself as an energy powerhouse.
OPEC’s work to increase global prices has actually benefited U.S. oil production. Trump walking away from the Iran Deal would serve to amplify this situation. If large quantities of Iranian condensate and light oil barrels, for example, are slapped with sanctions, that product will likely be replaced with U.S. light and condensate oil.
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