Having said that, U.S. oil output approaches 11 million barrels per day, and crude oil production exceeds that of Saudi Arabia and could surpass the world’s largest producer, Russia, sometime next year.
Despite that, the geopolitical risk premium in oil has driven crude prices to nearly four-year highs and shows no signs of abating. And so many interests benefit from higher oil prices; it appears there is a part of the world ready, and willing, to accept much more expensive energy.
This array of developments comes just as the summer driving season begins in the U.S., meaning that consumers should expect higher prices at the pump, certainly in excess of $3 per gallon, on average, and possibly much higher.
The U.S. exit from the Iranian nuclear deal, the unprecedented exchange of rocket attacks between Iranian and Israeli forces and the general belief among the U.S., Saudi Arabia and Israel that Iran’s regional expansion needs to be stopped all argue for a continued rise in the price of crude.
The Trump Administration’s plan to re-impose sanctions on Iran, and apply additional pressure on the Iranian regime, has heightened the fear that Iran will sponsor more terror attacks against Western targets, while its surrogates in both Syria and Lebanon (Hezbollah), will work to further destabilize the region, leading to an outright military confrontation between the sides.
It is becoming increasingly clear that Washington, Jerusalem and Riyadh are united in their desire to thwart any further territorial, or nuclear, ambitions Tehran may, or may not, harbor.
Certainly, Iran was said by U.S. intelligence and by U.S. allies, to be in compliance with the nuclear accord, but the U.S. walked away anyway.
Indeed, there is growing speculation among foreign policy experts that this administration wants to foment rebellion within Iran, by crippling its already weak economy and ushering in regime change.
It’s a notion that seems to be supported by the words and actions of Israel’s president, Benjamin Netanyahu and Saudi Arabia’s de facto leader, Mohammad bin Salman.
Despite President Trump’s criticism of the Bush administration’s “nation building” in Iraq, the newly installed hawks in this White House, some would argue, harbor no such hesitation when it comes to Iran.
However, unlike Iraq, the Iranian regime has not just greater control over the nation as a whole, but also control of a much more skilled military in the form of the Revolutionary Guard, Iran’s most elite and lethal force.
Regime change in Iran, if indeed that is the goal of this triumvirate, is not a given by any means.
Russia backs the mullahs in Tehran. China is somewhat dependent on Middle Eastern oil.
Even Europe, which until recently had been a solid American ally on foreign policy, is breaking with this White House openly, and has no appetite for an unsettling event in the Middle East.
How this plays out is anyone’s guess. But we are seeing the gloves come off as Iran and Israel have tested each other’s military prowess just days ago in the Golan Heights.
This ancient battleground may have been on slightly firmer footing with respect to the prospects for peace until President Trump assumed office.
His position on Iran has emboldened both Israel and Saudi Arabia, together, to challenge Iran more openly than at any time in the last four decades.
During the 1970s, the Arab oil embargo and the Iranian revolution brought the world to its knees economically, with two massive oil shocks that helped ignite hyperinflation and recession.
While a repeat of that outcome is not yet a forgone conclusion, as a wise man once said, history often rhymes.
War is hardly poetic, but one can already hear the meter of the past playing out in modern times.