Are we on the brink of war? It seems the answer could be yes as the United States and Iran trade attacks and counterattacks in the wake of the U.S. drone strike that killed Iranian Revolutionary Guard Gen. Qassem Soleimani last week. After Iran responded with a missile attack on U.S. troops, however, Iranian Supreme Leader Ayatollah Ali Khamenei made it clear that Iran’s retaliation measures were far from finished. Last night, they were given “one slap,” Khamenei was quoted as saying. “Such military actions are not enough as far as the importance of retaliation is concerned. What’s important is that their corruption-creating presence should end.”
Foreign Press reports that “the Iranian leadership appears somewhat divided about the sort of retaliation needed” but that “whatever comes, the worst of it may not happen right away. In terms of U.S. strikes on Iran, the only comparable moment was the April 1988 destruction of the Iranian navy by U.S. strikes, followed by the July 1988 accidental downing of an Iranian airliner and its 290 occupants by the United States. In that case, it was eight years before Iran took its full revenge with the 1996 Khobar Towers bombing in Saudi Arabia that killed 19 U.S. military personnel.”
While it is clear that the escalation in U.S.-Iranian tensions will have far-reaching economic, social, geopolitical consequences felt around the world, whether full Iranian retaliation is just around the corner or in the distant future, however, there is one place that the U.S. probably shouldn’t expect to be hard-hit: at the gas pumps.
According to a report by the Guardian, we can cross a gas price shock off of our list of worries concerning the current U.S.-Iranian crisis thanks to none other than hydraulic fracking. “Rumors of Middle East war used to inevitably lead to soaring gas prices but fracking revolution has changed the market landscape” reads the article’s punchy byline.
While oil prices did surge after the killing of Soleimani last week, with West Texas Intermediate crude prices rising by 6 percent to reach $64.72 a barrel, the Guardian writes that “that 6% rise is tiny compared with the swings seen in years past, largely because of the fracking revolution. Over the last decade fracking has allowed the US to squeeze oil and gas from shale and transformed the country into the largest producer of both.”
Backing this up, Stewart Glickman, energy analyst at CFRA Research told the Guardian that “if we had the same skirmishing between the US and Iran happening 20 years ago or even 10 years ago, I think the impact on the oil markets would have been a lot bigger, because the shale revolution hadn’t happened yet.”
While the once-gushing oil production out of West Texas’ Permian Basin may be slowing downnow, it’s meteoric rise in production over the last decade has led to what is referred to as the United States’ “shale revolution” and allowed the U.S. to be a largely self-sufficient energy producer to a degree which was previously not possible. This has given the U.S. a new kind of geopolitical leverage which has “sheltered the U.S. economy and consumer from the oil-price shocks common in the 1970s and 1980s.” and also making the U.S. less reliant on Iranian oil.
According to chief investment strategist at PNC Financial Services Group Amanda Agati, as paraphrased by the Guardian, “unless there’s a sustained price rise, any impact on consumers should be fleeting […] even if US crude oil prices rise to $70 a barrel, consumers are in good shape to weather the uptick as their finances are strong, the US economy is growing and unemployment is low.”
By Haley Zaremba for Oilprice.com