President Trump and members of his administration have repeatedly claimed that the United States’ prodigious oil production insulates the country from price shocks stemming from Iran’s closure of the Strait of Hormuz.
It’s not clear whether they’re acting as fools or knaves—but either way, they’re wrong.
U.S. oil production does not render American consumers immune to fluctuations in oil prices, which are determined by the interplay of supply and demand in a global market. To the contrary, because the U.S. economy burns more oil to produce each unit of economic output than peer countries do, the United States will suffer more from the Iran War price shock than will China, Russia, or the European Union.
Those facts will surprise many Americans because myths and misconceptions about oil have long clouded U.S. political debates and the reasons behind U.S. vulnerability are genuinely counterintuitive.
Read at Responsible Statecraft
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