{"id":19281,"date":"2020-01-14T22:36:11","date_gmt":"2020-01-14T22:36:11","guid":{"rendered":"https:\/\/www.lifeandnews.com\/articles\/?p=19281"},"modified":"2020-01-15T05:20:11","modified_gmt":"2020-01-15T05:20:11","slug":"why-the-us-iran-conflict-isnt-driving-oil-prices-higher-and-why-it-probably-should","status":"publish","type":"post","link":"https:\/\/www.lifeandnews.com\/articles\/why-the-us-iran-conflict-isnt-driving-oil-prices-higher-and-why-it-probably-should\/","title":{"rendered":"Why the US-Iran conflict isn\u2019t driving oil prices higher \u2013 and why it probably should"},"content":{"rendered":"

Scott L. Montgomery<\/a>, University of Washington<\/a><\/em><\/p>\n

Assassinations, militaries on high alert, geopolitical tensions at the boil. Any one of these in Persian Gulf countries would have roiled oil prices a few years ago. Today, even in combination, they hardly register<\/a>.<\/p>\n

Is the oil market now so secure that even the prospect of war between Iran and the U.S. has little effect? More broadly, is this relatively sanguine response<\/a> warranted at this time?<\/p>\n

Reasons oil traders should be nervous<\/h2>\n

The assassination of Qassem Soleimani, Iran\u2019s top military commander and head of its Revolutionary Guards, happened on Iraqi soil, without Iraqi permission, while Soleimani was reportedly<\/a> on official business.<\/p>\n

This attack by a U.S. drone, which killed up to 10 Iranian and Iraqi personnel, transgressed two nations\u2019 sovereignty. It could be easily defined<\/a> as an act of war.<\/p>\n

Iran did so<\/a> and responded with a missile barrage<\/a> at two U.S. bases, apparently causing no casualties. Secretary of State Mike Pompeo, meanwhile, completely rejected<\/a> Iraq\u2019s demand that American troops leave its soil, only a week after U.S. warplanes carried out lethal attacks<\/a> on Iran-backed militias in Iraq, also without Iraqi authorization.<\/p>\n

These are grim new events in a volatile region essential to global oil supply, yet they had no important impact on oil prices. Over a few days, prices went from $US66 per barrel to $69, then down to $65<\/a>. This isn\u2019t even a hiccup; in a year, it will be invisible on the price curve.<\/p>\n

True, President Donald Trump said<\/a> Iran was \u201cstanding down,\u201d and there would be new sanctions, not attacks. Yet this president is notorious for impulsive decisions<\/a>. Iran, moreover, may take its time in seeking revenge.<\/p>\n

And in the midst of military tensions, Iran mistook<\/a> a commercial airliner for a warplane and shot it down, killing 176. It was a terrible echo of the 1988 downing<\/a> of an airliner by the U.S. warship Vincennes in another moment of high military anxiety.<\/p>\n

Reasons they aren\u2019t<\/h2>\n

Oil traders therefore have much reason to be nervous. But they aren\u2019t. Why?<\/p>\n

A big reason, which I noted in a previous Conversation article<\/a>, is that the global oil market has abundant supply, fed by soaring U.S. production. In under a decade, America has been transformed from a huge importer to a major new exporter. These exports grew<\/a> from 0.6 million barrels per day in early 2017 to over 4 million by December 2019<\/a>.<\/p>\n