It looks like the decade-old U.S. shale oil boom may keep us out of war. Recall that when Iraqi President Saddam Hussein invaded Kuwait in 1990, then-President George H.W. Bush led a coalition of countries against Iraq. Kuwait was quickly liberated.
Since Kuwait had not been a strong U.S. ally, accusations immediately emerged that oil was the real motive behind the war.
Whether oil was the motive driving the U.S. effort, both access to it and the fear of rising oil prices almost certainly played a role — because the U.S. economy and military readiness depended on importing middle-eastern oil.
No more, and you can thank the shale oil boom for that.
Of course, the recent drone or missile attack on Saudi Arabian oil processing facilities, which knocked out about 5 million barrels of production, wasn’t a Kuwait-style invasion, but it’s the kind of action that could lead to war.
If it does, trying to contain Iran’s expansionist mischief-making and support for terrorism, not access to oil, would likely be the primary reason.
While access to foreign-produced oil is still important, it’s simply not the economic threat it used to be.
And you can see that in the impact on oil prices.
After the recent attack oil prices initially spiked, but markets often overreact and then settle down.
And that’s what happened. West Texas Intermediate (WTI) crude oil jumped from nearly $55 a barrel on Friday, Sept. 13, to nearly $63 on Monday, but has since declined to about $58 per barrel.
What does that mean for consumers? Not a lot.
Prior to the attack the average nationwide cost for a gallon of gasoline was about $2.55. Analysts suggest gasoline prices could rise by … wait for it … 25 cents a gallon.
But EIA says the current price is down nearly 30 cents from a year ago. So if gasoline prices do spike 25 cents, it would put us about where we were last September, when there was no major confrontation in the Middle East.
What the shale boom has done is free the United States from dependency on middle-eastern oil. In August 1990, when Hussein invaded Kuwait, the United States was producing about 7 million barrels of oil per day. Today, we’re producing 12.4 million barrels per day.
Yes, we still import some crude oil, mostly from Canada.
Which raises an important point: Our current challenge isn’t trying to find foreign sources for oil, but getting U.S. production from the wellhead to the refinery. And the most efficient and least expensive way of transporting oil to refineries is by pipelines.
That’s why one of President Trump’s responses to the attack on Saudi oil production was to urge the relevant U.S. agencies to expedite the pipeline approval process.
Environmentalists hoping to limit, if not end, U.S. oil production have taken to challenging pipeline construction — e.g., the Dakota Access and Keystone XL pipelines.
Oil that can’t be transported to refineries is oil that can’t be consumed.
The recent attack on the Saudi facilities demonstrates, yet again, access to energy is a critical national security issue.
Fortunately, a threat to peace in the Middle East, troublesome as that is, isn’t a threat to the American economy and national security.
Merrill Matthews is a resident scholar with the Institute for Policy Innovation in Dallas, Texas.