Could the Middle East’s dispute involving Qatar and several of its neighbors lead to higher prices at a pump near you? Absolutely.
Saudi Arabia, along with the United Arab Emirates, Egypt, and Bahrain, moved to isolate Qatar on Monday, cutting diplomatic ties and suspending all travel to and from the small Gulf State. Yemen, Libya, and the Maldives later followed suit. Those nations have accused Qatar of financially supporting Islamist terrorists, including those from Iran, Saudi Arabia’s sworn enemy.
Normally, the average American wouldn’t have a reason to worry about the diplomatic disputes of countries half a world away. But this is no ordinary region; it’s one that supplies much of the world, and certainly the United States, with a large proportion of the oil it needs to keep functioning. During the first quarter of this year, the Saudis alone supplied us with an average of 3.86 million barrels of oil per day, nearly half of all our imports. (Yes, we’re not self-sufficient: We import about 40 percent of the oil we need.)
Oil prices are set on the global market. So any strife that affects the Persian Gulf — any conflict, tiff, argument, or squabble — can upset the global balance, leaving the United States exposed. Whenever there’s a price spike, working families get hit first and hardest, because when they go to fill up at the pump, they have to pay whatever the market dictates.
To borrow an old line, when the Persian Gulf sneezes, the U.S. catches a cold.
As Bloomberg noted:
“While the Saudi-Qatar diplomatic spat hasn’t affected [oil] shipments, further escalation could raise the prospect of supply disruptions from the Middle East, including OPEC members Saudi Arabia, Iran and Qatar. The nations all use the Strait of Hormuz, through which the U.S. Department of Energy estimates about 30 percent of seaborne oil trade passes.”
So while the current situation as it stands is unlikely to raise oil prices in the short term, we’re one wrong move away from a serious oil crisis and gas prices back above $4 per gallon.
The entire global system is fragile, subject to roller-coaster gyrations based on any event large or small — a terrorist attack, pipeline rupture, election scandal, even a stock-market glitch. It doesn’t even have to be anything real: Media reports Tuesday stated that U.S. officials believe Russian hackers planted a fake report that accelerated the crisis. Which only underscores how absurdly vulnerable the market is.
We won’t escape the volatility of oil until we get serious about increasing availability of domestically produced alternatives. Americans need reliable access to low-priced transportation fuel. And as long as we rely on a system so easily affected by unpredictable events halfway around the world, we’ll never be in control of our own fuels system, even though it’s a crucial part of our lives.
- The connections between oil and terrorism
- The dangers of being dependent on foreign oil
- The perverse connection between oil and women’s rights
- If you really want to support the troops, break the oil monopoly
- Oil prices will inevitably rise, because that’s what they do