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As always, the markets are roiling in anticipation of a US-led attack on Syria, and the ensuing trouble that such an attack could cause in the Middle East, and its impacton global oil production and supplies.
On the New York Mercantile Exchange, West Texas Intermediate crude oil jumped more than $3 a barrel on Tuesday to begin trading on Wednesday at $110.45. Gasoline prices in the US have risen the most in six weeks despite most analysts having predicted a fall in price in line with the traditional seasonal decline in demand.
The problem is that any conflict in the Middle East runs the risk of spilling over into the other countries, potentially impacting on crude oil production and supplies to the rest of the world via the Straits of Hormuz.
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This time, however, for the first time in 50 years, the US is not as worried about disruptions to the oil markets and potential short term spikes in price, resulting from conflict in the Middle East, as domestic production, driven by the shale boom, is at a 20 year high.
Massive success in fracking means that the US relies far less on foreign imports, and the WSJ points out that the US now has enough crude oil to supply itself for 269 days, without imports; up from 150 days just five years ago. That figure jumps to over a year once Canadian crude supplies, the US’s largest source of oil imports, is taken into consideration; and crude will continue to flow from Canada regardless of any conflict in the Middle East.
Fracking will never make a country completely immune to global price volatility, but it can provide protection against short term swings created by international supply disruptions. Maybe this relative freedom from spikes in oil prices has released the US to move into action in the Middle East sooner than it previously would have.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com