Iran And Saudi Arabia Standoff Hasn’t Raised Oil Prices Thanks To US Fracking
Instability in the Middle East hasn’t led to an increase in oil prices thanks to the surge in American oil production caused by hydraulic fracturing, or fracking, according to a Tuesday National Public Radio article.
Historically, when political tensions increased in the Middle East, the price of oil rose, as the conflict could potentially interrupt drilling or interfere with oil shipments. As recently as 2011, comparatively minor political tensions in Libya led to massive increases in the price of oil.
“Oil prices have actually hit historic lows even given the current tensions between Saudi Arabia and Iran,” Emma Ashford, an expert in the politics of oil producing countries at the libertarian Cato Institute, told The Daily Caller News Foundation. “That’s the result of two factors. First, it’s very unlikely this crisis will impact actual oil production or supply in the region. Second, the fact is that there remains a lot of excess supply on global markets right now, thanks to increased production from unconventional sources like fracking.”
When Saudi Arabia and three other Sunni nations cut diplomatic ties with Iran this week, a sharp increase in the price of oil would normally have followed, but the increase of American oil production due to fracking has made the U.S. much less dependent on Middle Eastern oil. The U.S. could even become energy independent in the next four years. Similarly, the Islamic State’s takeover of oil fields in Syria and northern Iraq has not disrupted the global oil market because American oil has been available to compensate.
Fracking is an industrial process that uses high-pressure water mixtures to release oil and natural gas from rock. The process has helped America surpass both Russia and Saudi Arabia to become the world’s largest and fastest-growing oil and natural gas producer in 2015. The fracking-powered increase in American energy production, as well as feuds between oil-rich countries which prevented them from reducing production, has led to very low oil prices.
The average American now pays less than $2.00 a gallon for gasoline due to cheap energy provided by fracking.
The current national average gas price is $1.99 per gallon, the cheapest it’s been since March 25, 2009. Just last year in 2015, when the Middle East was relatively stable, consumers paid an annual average gasoline price of $2.40 per gallon. Energy prices in general dropped 41 percent over the course of 2015 due to fracking, according to the Energy Information Administration.
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