The White House and financial markets are “dangerously discounting” the impact on oil prices of the current civil unrest in Iraq and ongoing turbulence in the Persian Gulf, according to Democratic US Senator Joe Manchin, Senate Energy Committee ranking member.
Manchin said the White House has taken its eyes off the ball by focusing on Syrian oil while Iraq – the fourth-largest oil producer in the world – is in complete turmoil as civilian protests in Baghdad and Karbala have led to the deaths of hundreds of protesters in recent weeks.
Manchin, who just returned from visiting Saudi Aramco facilities attacked by Iranian surrogates, said the global oil supply had never been so vulnerable to disruption.
Senate Energy Committee chairwoman Lisa Murkowski credited the low oil prices of around US$60 per barrel notwithstanding the Iraq protests, the Saudi Aramco attack and ongoing conflicts with Iran to market complacency, confidence in US domestic oil and gas production, and the US Strategic Petroleum Reserves (SPR).
“What we have seen with the disruptions, attacks [Saudi Aramco, Strait of Hormuz] in any other point of time would have sent the price of oil through the roof. What we saw [was] a little bit of a spike and things settled back down,” Murkowski said, adding: “In my view this speaks to the role the United States is now playing. It is significant that we are more insulated because of the [US domestic] production we have.”
Murkowski also said the SPR is an added “insurance policy” that can limit any spike in oil prices.
However, she said the US government could use its SPR in the case of a real crisis to guarantee supply.
Murkowski and Manchin were both speaking on an energy panel hosted by the Center for Strategic and International Studies last Wednesday.
Hassan Aldahan, an Iraqi-American investment banker, said that while there may be a short-term spike in oil prices, US self-sufficiency from fracking will ultimately depress prices to the $30 range over the long term.
A source familiar with the thinking of the US administration said President Donald Trump can tolerate oil prices rising to $80-$85 per barrel but will take action once prices go above $85 for its knock-on effect on US auto manufacturers, airlines and the travel sector.
The source also said US shale producers are happy with oil prices at around $77 but are fully aware that Brent above $85 is unsustainable.