Average US diesel prices rising as war roils Middle East

Until something like that happens, “the oil market is going to be like everyone else, monitoring the events in the Middle East,” Lipow said.

One reason 1970s-style gas lines are unlikely: U.S. oil production is at an all-time high. The U.S. Energy Information Administration, an arm of the Energy Department, reported that American oil production in the first week of October hit 13.2 million barrels per day, passing the previous record set in 2020 by 100,000 barrels. Weekly domestic oil production has doubled from the first week in October 2012 to now.

“The energy crisis of 1973 taught us many things, but in my mind, the most critical is that American energy strength is a tremendous source of security, prosperity and freedom around the world,” said Mike Sommers, president and CEO of the American Petroleum Institute, the U.S. oil industry’s top lobbying group.

In a speech on Oct. 18, marking the 50th anniversary of the 1973 oil embargo, Sommers said current U.S. production contrasts sharply with “America’s weakened position during the Arab oil embargo.” He urged U.S. policymakers to heed what he called the lessons of 1973.

“We cannot squander our strategic advantage and retreat on energy leadership,” said Sommers, who has repeatedly criticized President Joe Biden’s policies restricting new oil leases as part of Biden’s efforts to slow global climate change.

“With an unstable world, war in Europe, war in the Middle East, and energy demand outstripping supply, energy security is on the line,” Sommers said in a speech at the Hudson Institute, a Washington think tank.

“American oil and gas are needed now more than ever,” Sommers said. “Let’s take to heart the lessons we learned from 1973 and avoid sowing the seeds of the next energy crisis.”

For now, the crisis isn’t a repeat of 1973. Arab countries aren’t attacking Israel in unison, and OPEC+ nations have not moved to restrict supplies or boost prices beyond a few extra dollars.

There are several wild cards in the energy market. One is the supply of Iranian oil. Eager to avoid a spike in gasoline prices and inflation, the U.S. has quietly tolerated some exports of Iranian oil to destinations such as China instead of going all in on sanctions aimed at Iran’s nuclear program.

If Iran, which has warned Israel not to undertake a ground offensive, escalates the Gaza conflict — including a possible attack by Hezbollah militants in Lebanon supported by Iran — that might change the U.S. stance. “If the U.S. were then also to enforce the oil sanctions against Iran more strictly again, the oil market would tighten noticeably,” say commodities analysts at Commerzbank.

A shake went through the oil market on Oct. 18 after Iran’s foreign minister called on Muslim nations to launch an oil embargo on Israel, but prices soon ebbed.

U.S. lawmakers from both parties, meanwhile, have urged Biden to block Iranian oil sales, seeking to dry up one of the regime’s key sources of funding.

Another wild card is how Saudi Arabia would respond if Iranian oil is restricted. Oil analysts say that while the Saudis may welcome recent oil price hikes, they don’t want a massive price spike that would fuel inflation, higher central bank interest rates and possible recession in oil-consuming countries that ultimately would limit or even kill off demand for oil.

A third unknown is whether more oil will reach the market from Venezuela. The U.S. agreed on Oct. 18 to temporarily suspend some sanctions on the country’s oil, gas and gold sectors after Venezuela’s government and a faction of its opposition formally agreed to work together on election reforms.

Venezuelan production could increase in 2024. In the next six months, however, production could ramp up by some 200,000 barrels a day, a relative drop in the ocean, according to Sofia Guidi Di Sante, senior oil market analyst at Rystad Energy.

Wyoming Sen. John Barrasso, the top Republican on the Senate Energy and Natural Resources Committee, slammed the U.S. action as a “gimmick” that appeases a brutal regime in Venezuela.

“Joe Biden’s energy policies put America last,” Barrasso said, citing the Democratic president’s decisions to kill the controversial Keystone XL oil pipeline and sell off significant portions of the nation’s Strategic Petroleum Reserve, taking it to its lowest level since the 1980s. The Energy Department said on Oct. 26 it will seek offers to start refilling the oil reserve in December, with monthly solicitations expected through May 2024.

“He eased sanctions on Iran, which funds terrorism across the Middle East. Now with Israel under attack, Biden is desperate for anything to mask the consequences of his reckless policies,” Barrasso said. “America should never beg for oil from socialist dictators or terrorists.”

The Treasury Department says it has targeted nearly 1,000 individuals and entities connected to terrorism and terrorist financing by the Iranian regime and its proxies, including Hamas, Hezbollah and other groups in the region.

“We will continue to take action as appropriate to counter Iran’s destabilizing activity in the region and around the world,” Treasury said in a statement.

The Associated Press contributed to this report.