I’m off by a week, but…Happy New Year! I hope everyone resolved to buy a higher fuel economy or electric car or to find alternatives to driving all the time, because it looks like it could be yet another year of oil and gasoline price spikes, thanks yet again to Middle East security issues.
Iran/U.S. tensions driving up oil prices
Last year, it was the Arab Spring, especially the shutdown of oil supplies from Libya, that helped cause oil and gasoline price spikes. This year it could be Iran, which recently threatened to close off the Strait of Hormuz, the key waterway for shipping oil out of the Persian Gulf. They backed off that threat but have since taken a variety of other aggressive steps, including warning a U.S. aircraft carrier to stay out of the Persian Gulf.
Whether you follow Middle East issues or not, you should care about this news because it is at least part of the reason oil prices are back over $100 per barrel yet again.
Some Wall Street traders are already betting that oil prices could soon rise to between $110 and $130 per barrel due to tensions between Iran and the U.S. and possible strikes in Nigeria, another major oil exporter. At that level, the U.S. will again be sending more than $1 billion every day to other countries to pay for petroleum imports.
The last time oil prices hit that range, in spring 2011 and spring/summer 2008, we were paying $4 per gallon for gasoline.
Instability in the Middle East Has Driven World Oil Markets for Decades
Sadly, this is more of the same that we’ve seen for the last 40 years. As this New York Times graphic illustrates, most of the oil price spikes we’ve experienced since the early 1970s have been tied to wars, instability, and tension in the greater Middle East. This region produces about 40 percent of the crude oil that fuels economies around the world every day. As a result, any supply disruption, or even a hint thereof, can set oil markets on edge.
This is a problem that will only get worse over time because countries in the greater Middle East control over 60 percent of the world’s proven oil reserves. So, as other countries start to run out, it will get easier and easier for countries like Iran to disrupt the world oil market. Consumers, and the U.S. economy as a whole, will continue to be harmed by oil price spikes until we dramatically cut our oil dependence.
Help curb our addiction
Now, the question is: what are you going to do with this latest reminder of the depth of our dependence on oil? We’ve got a plan to cut projected U.S. oil dependence in half by 2030. You’ll be hearing more about it in the coming months, but for now, you can put a plan of your own into action. Here are a few suggestions:
- As I mentioned at the beginning of this post, you should take direct action. You can still make a New Year’s resolution to buy a hybrid or electric car, carpool more often, or perhaps bike or walk to work or when you are on trip.
- You can also make sure President Obama follows through and finalizes strong fuel economy and global warming pollution standards for cars and trucks. Let him know you want cleaner cars to help cut our oil addiction.
- Finally, if you’re not in the market for a new car, follow these tips to make sure you use the one you’ve got more efficiently.
We won’t end our addiction to oil overnight, but the latest turmoil in the Middle East should serve as a stern reminder that we’ve got to start weaning ourselves now.