Al-Etihad, UAE, January 18
President Donald Trump was wrong last week when he said that the United States no longer needs Middle Eastern oil. First, US refineries still need to process Middle Eastern oil in order to make the products their customers want. Second, American car and truck drivers need Middle Eastern oil; otherwise, they will face rising prices at local gas stations. Trump made this remark in a speech delivered at the White House after Iran launched a barrage of missiles at two US air bases in Iraq, amid fears of an escalation in the form of attacks on oil infrastructure in the region, including in the Strait of Hormuz. There is no doubt it is true that little of the crude oil produced in the Arab Gulf region is now finding its way to refineries in the United States. According to oil-tanker tracking data collected by Bloomberg, less than 5% of the 16.5 million bpd of oil and condensate that flowed through the Strait of Hormuz in 2019 was destined for US refineries. In fact, the vast majority of it was sent to four Asian countries – China, India, Japan and South Korea – alongside a few other players in the region. Thus, it comes as no surprise that Trump has been calling on these nations to play a greater role in protecting oil flows across the Gulf. However, the importance of oil exports to the United States cannot be underestimated. The US is still the fifth-largest buyer of Middle Eastern crude oil. Arab Gulf countries still contribute one in every eight barrels of imported oil in the United States. Indeed, the US still imports more crude oil than it exports. Thus, it remains strongly linked to the global oil market. With tension now increasing with Iran, there are fewer sources from which to import heavy crude oil (the United States imposed sanctions on Venezuelan oil exports in January 2019, while Mexico and Colombia are facing declining production due to a lack of new investment). Currently, Canada is the largest supplier of oil to the US, while the Middle East provides most of the rest. Even more importantly, regardless of where the US imports Middle Eastern oil or not, the quantities of oil generated in the region still have a profound impact on the global prices of crude oil, in addition to the prices of gasoline and diesel fuel. This is especially true in the United States, where low fuel taxes mean that prices are more responsive to fluctuations in global crude prices. As a case in point, the average price of unleaded gasoline jumped by 10 US cents per gallon following the attacks against Saudi oil facilities last September. Since then, the death of Qasem Soleimani and Iran’s responses have had a smaller, yet still noticeable, impact on US fuel prices – even without an explicit Iranian threat to stop oil flows in the region. If the mere possibility of a slowdown in the flow of oil in the Arab Gulf can push American oil prices up, imagine what a real disruption would do, let alone a complete cessation of supply. Certainly, no president would want this to happen during an election year. Regardless of his prideful statements, this is true of President Trump as well. – Julian Lee (translated by Asaf Zilberfarb)