The world’s oil market seized in recent days amid heightened tensions between the United States and Iran in the Strait of Hormuz. Oil-rich Iran, sensitive to the prospect of global sanctions on its exports, hinted that it would attack American shipping in the strait.
Approximately 35 percent of all oil shipped by sea, and 20 percent of all oil traded worldwide, travels through the strait, according to the U.S. Energy Information Administration. The vast majority of oil exported from the Middle East passes through this strategic sea lane. At its narrowest point, the Strait of Hormuz is just 35 miles wide, qualifying it as one of the most vital choke points on the planet.
Market analysts become jittery when even a whiff of a potential oil supply interruption permeates the air. This latest incident resulted in a $5 to $10 a barrel spike in futures. The fact that oil prices didn’t leap higher is a vote of confidence that ultimately, Iran will not deliver on its threats. All bets would be off if Iran followed through on its blockade threat, however, and consumers could see a 50 percent increase in oil prices within days, according to energy analysts.
If there is an upside to the Persian saber-rattling, it is the potential to serve as a wake-up call to Washington’s policymakers on the urgent need to increase America’s domestic energy production.
The good news for Americans is that domestic energy resources are so vast that our power needs can be met for generations to come, according to the "North American Energy Inventory” released in December by the Institute for Energy Research. That is, if Washington will do its part by getting out of the way.In terms of oil, the proven reserves of 1.79 trillion barrels available in North America is more than will likely ever flow through the Strait of Hormuz and in fact twice that of all the OPEC nations combined. That’s enough to fill the tank of every passenger car in the United States for the next 30 years. Our natural gas future is even brighter. An estimated 4.244 quadrillion cubic feet of recoverable resources could keep every home well-heated for the next 575 winters at current usage rates. With proven reserves of 497 billion short tons of coal, our need for electricity will be satisfied for the next 500 years at the current level of consumption for electricity generation. Ill-advised policymakers and federal regulators are the only barrier separating consumers from affordable domestic energy. These needless regulations and restrictions have little to do with safe, clean energy production and everything to do with political cronyism and irrational green agendas. The result: America remains far too vulnerable to shifting events on the other side of the globe. Perhaps the incident in the strait is enough to provide Washington with the impetus it needs to finally unleash domestic energy production and put tens of thousands of Americans back to work in the process.