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What Middle East crisis? Why oil prices aren't rising

Data: EIA; Chart: Axios Visuals

Despite rising unrest in the Middle East — including the death of an Iranian commander — America’s average gasoline prices have remained under $3 a gallon.

Why it matters: Practically speaking, it’s great for drivers’ pocketbooks — and President Trump’s re-election campaign. It also shows the remarkable cushion created by the United States' booming oil production, which has doubled over the last decade.

“The U.S. oil boom is the primary reason nobody is seriously discussing triple-digit oil prices even with everything that is going on and went on this summer.”
— Ashley Petersen, senior oil market analyst, consulting firm Stratas Advisors

Driving the news: Several events in the Middle East over the last few years, and especially the last nine months, have put the reliability of production in the oil-rich region at risk, including:

  1. The U.S. airstrike that killed Iranian general Qasem Soleimani.
  2. September's attacks on Saudi's oil facilities, which the administration blamed on Iran.
  3. Last spring’s and summer's attacks on oil tankers in the Strait of Hormuz, a narrow waterway bordering Iran that moves roughly a fifth of all oil traded in the world.
  4. Sanctions on Iran’s oil industry that the Trump administration has imposed over the past couple of years.

By the numbers:

  • The national average price of a gallon of gasoline has been steady at $2.58, more than half of which is driven by global oil prices.
  • Global oil prices are hovering below $70 a barrel.
  • Oil prices have risen to varying degrees immediately following many of those events — including nearly 20% after the September attacks on Saudi oil facilities — but they've always dropped quickly.

How it works: No country can ever be truly “energy independent” (as the popular political messaging goes) because oil is traded on a global market. But America is as close to it right now as it’s ever been.

  • The U.S.’s oil-production increase — from under 6 million barrels a day in 2010 to nearly 13 million today — is reducing its dependence on foreign oil and creating a supply surplus around the world.
  • This surplus is, in turn, causing other nations — including those in OPEC, the mostly Middle East producing bloc — to curtail production. (Check out the chart above, which shows a near-record low of U.S. oil imports from OPEC nations.)
  • That’s keeping oil prices lower than where they likely would have been 5–10 years ago, experts say, because oil market traders know excess capacity is there to kick in if needed.

Yes, but: Even the best cushion can’t protect against everything. If an extreme (albeit unlikely) scenario were to occur — like Iran blocking the Strait of Hormuz for an extended time — that would likely cause global oil prices to rise substantially and show the limits of America’s plentiful oil supplies.

The intrigue: America’s booming oil industry is affording Trump the geopolitical room to be more aggressive on Middle East policy, experts say, even in an election year when high gas prices would make voters angry at incumbent politicians.

What we’re watching: To what extent Trump seeks to preemptively temper the potential for high gasoline prices by tweeting on the topic like he has in the past when gasoline prices rose. We saw a small glimpse of that Tuesday.

  • Trump tweeted about how, in a recent White House meeting with a top Saudi government official, he discussed, among other topics, oil prices and stability in the Middle East.