So far, oil markets have mostly shrugged off the turmoil in Iraq. The world’s seventh largest crude producer is tearing apart at the seams thanks to sectarian violence, yet the cost of a barrel is up just 5 percent this month—a bump, sure, but not a crisis.We can largely thank the U.S. fracking revolution. Since 2010, when drilling began to recover from its recession-induced drop, the world has added roughly 2.6 million barrels a day to production. As it happens, the United States alone has added about 2.5 million barrels a day. Or, to put it another way, were a big part of the globes cushion. Were it not for the U.S. drilling revival, the market would be far less equipped to deal with even small disruptions, much less something catastrophic. You can be certain the fear premium traders have priced in today would be higher than 5 percent. And the economic pressure for Washington to swoop into Iraq to maintain order would be stronger.
Posted on: Mon, 23 Jun 2014 03:57:58 +0000
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