Earlier this month, President Trump withdrew from the Joint Comprehensive Plan of Action, better known as the Iran Nuclear Agreement. The decision removed the United States from the 2015 multilateral accord that sought to limit Iran’s development of nuclear weapons. President Trump, in addition to withdrawing from the deal, has directed our Treasury Department to re-impose sanctions on Tehran, creating a wave of potential economic “aftershocks” around the globe.
While the full effects of the decision remain to be seen, Americans must be prepared to weather the consequences — particularly with regard to energy prices. Iran is the fifth-largest oil producer and the third-biggest member of the Organization of Petroleum Exporting Countries (OPEC). The country increased its oil production by 1 million barrels per day in early 2016. Now, much of that oil will stay in the ground.
This anticipated supply reduction comes as developing countries continue to drive global demand for fossil fuels while OPEC output restrictions and instability in Venezuela further rankle international markets. The results are already being realized at American gas pumps. U.S. gasoline prices have climbed 20 cents per gallon this month, and in at least 10 states motorists are paying $3 or more per gallon — nearly 20 percent more than last year.
To curb rising energy costs here at home — and mitigate the far-reaching impacts they have on economic growth — policymakers must prioritize infrastructure development. The United States is flush with oil and natural gas resources. Astounding shale development has positioned America as the largest producer of oil and gas, and the U.S. Energy Information Administration forecasts that shale production will increase to a record 7.18 million barrels per day in June.
Yet, as drivers’ costs to fill up their cars attest, the remarkable energy production going on right here in America has not deflated consumer prices the way many predicted. As recently as this year, analysts predicted oil prices would not exceed $60 per barrel because of an abundance of U.S. supply. Yet, prices exceeded $70 per barrel this month, the first time since 2014.
The reason this is happening is a shortage of pipeline capacity. Because the United States’ relatively newfound shale development has reshaped the flow of energy, many production sites lack the midstream infrastructure to move products to markets. As a result, many producers have had to throttle back their output or flare off supplies to keep rigs running.
In West Texas’ Permian Basin — the largest producing region in the United States, where oil output could rival that of Iran — pipelines are at near capacity. Prices at the Waha trading hub fell 20 percent below the national average last fall, and experts predict they could tumble further this year. The Wall Street Journal reported last month that investors are already moving resources to other locations, despite the immense potential of the region.
Fortunately, the president has been unapologetic in his support for America’s oil and gas producers. The White House has begun to cut costly red tape and streamline the approval process for U.S. infrastructure builders. Under leadership appointed by President Trump, the Federal Energy Regulatory Commission (FERC) has approved several key pipeline projects, further reinforcing the regulatory process.
President Trump has demonstrated to our allies and opponents alike that he is prepared to fulfill his campaign promises. While we wait to see the full aftermath of his decision, it will be critical to shore up domestic energy resources. To bolster our strength on the global stage, policymakers must continue to provide the tools to support continued growth at home by prioritizing America’s energy infrastructure.
Major General James “Spider” Marks (U.S. Army, ret.) is president of the Marks Collaborative and a strategic advisor to the GAIN Coalition.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.
