New York
CNN
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The American oil industry is on high alert for an escalation of the violence in the Middle East that disrupts the flow of oil out of the region.
Mike Sommers, CEO of the American Petroleum Institute, worries there is a growing chance the crisis will intensify and derail oil supplies.
“This should be a real concern, I think, to every American,” Sommers told CNN in an exclusive interview. “Oil tankers are being attacked by the Houthi rebels in the Red Sea. And what you’re seeing is a number of those oil tankers no longer traversing the Red Sea.”
Sommers, who runs a powerful oil-and-gas trade group whose members include ExxonMobil, Chevron and Hess, also cited the potential for the Israel-Hamas war morphing into a regional conflict that endangers energy supplies.
“If this situation in the Middle East continues to escalate,” Sommers said, “that will certainly have an effect on price.”
Last month, BP halted shipments through the Red Sea, citing a “deteriorating security situation.” Attacks on vessels have only intensified since then, with Houthi rebels launching unmanned surface drones against commercial shipping lanes and US Navy helicopters sinking three Houthi boats and killing those aboard.
Bab al-Mandab Strait, a sea route connecting the Red Sea to the Arabian Sea, is a critical passageway for crude oil and fuel. About 8.2 million barrels per day of oil and oil products transited the Red Sea through the strait this year, according to oil research firm Vortexa.
Oil executives are working “hand in glove” with the US Navy and other elements of the federal government to “ensure that these attacks stop,” Sommers said.
Elsewhere in the Middle East, ISIS claimed responsibility last week for deadly twin blasts in Iran that killed at least 84 people. Violence has also increased in Lebanon between Israel and Hezbollah, the pro-Iranian group.
Helima Croft, global head of commodity strategy at RBC Capital Markets, told clients late last week that the violence in Lebanon and Iran is unlikely to be the triggers for a regional war.
However, the former CIA analyst cautioned: “If the current trends continue it is hard to see how it remains a contained conflict.”
Although oil prices have surged at times during the Israel-Hamas war, those spikes have been fleeting. US crude closed at $70.77 a barrel on Monday, about 15% below where it traded before the October 7 Hamas attacks on Israel.
One major reason energy markets have been relatively calm is robust supply from the United States.
“Oil prices have stabilized right now and it is only because of the American energy revolution,” Sommers said. “American oil and gas producers should be thanked for ensuring that volatility hasn’t gone in an upward direction.”
As of the final quarter of 2023, the United States was producing more oil than any country in history. Not only has that US oil offset the loss of OPEC+ barrels taken offline by the producer group, but it has acted as a shock absorber as the security situation in the Middle East devolves.
“Ten years ago if this same situation was occurring, we’d be dealing with significantly higher oil prices,” he said. “We’re producing more oil than this country ever has and that is a huge advantage to the American consumer and, by the way, to our national security. We don’t have to go and beg, borrow and steal from other countries for energy.”
Despite the security jitters about the Middle East, gas prices are 20 cents cheaper today than at this point last year, according to AAA.
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