As fears grow that a possible U.S. strike on Iran could choke global oil supplies and drive up prices, former Energy Secretary Dan Brouillette said. strong American production is currently maintaining its course towards a price shock of 100 dollars per barrel.
“What we’re not seeing is a lack of supply in the market. That’s traditionally what drives prices up. That’s not the case today,” Brouillette said Monday.
Instead, he said the recent jump reflects traders factoring in the possibility that an escalation in tensions — including a possible Iranian strike — could disrupt oil shipments through the Strait of Hormuz, a narrow waterway that carries about 20% of the world’s petroleum liquids.
He told FOX Business that oil is “abundant” in the market thanks to the fact that the United States is “producing more…than ever.”
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Oil pumps stand at the Inglewood oil field on November 23, 2021 in Los Angeles, California. (Mario Tama/Getty Images/Getty Images)
“We’re setting records, and that brings stability to the market,” he said, adding, “so instead of $100 a barrel oil today, we’re seeing prices in the mid-60s.”
His comments came as crude hovered around $66.59 a barrel at the time of broadcast, following a recent rise fueled by rising tensions with the Islamic Republic.
Brouillette said he expects prices to stabilize over the coming weeks as uncertainty, rather than actual shortages, continues to generate short-term volatility.
“It’s truly a risk price today. It’s not an offer price,” he said. “And I think we’re going to see that for a while to come.”
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Oil tankers pass through the Strait of Hormuz on December 21, 2018. (Reuters/Hamad I Mohammed / Reuters)
Brouillette argued that if supply remains strong, prices should eventually stabilize rather than climb.
“I think you will see them stabilize over time,” he told Maria Bartiromo. “We’re in the mid-60s today. It won’t surprise me if we see it drop slightly, especially if we have a situation in Iran where they return to what might be called polite society.
A change in Iran’s position – or a broader policy shift that would bring more Iranian crude back to the global market – could further ease the pressure, he said.
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“If this regime disappears and oil becomes available, we are potentially looking at another million and a half barrels of oil coming onto the global market,” Brouillette said.
“This will significantly change the supply situation and could push prices down slightly.”