The U.S. is taking steps to protect the global economy against the oil crunch caused by the?Iran war. This includes boosting exports and easing sanctions selectively, as well as tapping into strategic reserves. Washington's reputation may suffer in some circles, but it is cementing the US's position as the dominant energy superpower. The Organization of Petroleum Exporting Countries is largely powerless, unlike in previous oil crisis. The Organization of Petroleum Exporting Countries has been left largely powerless in this oil crisis. Saudi Arabia, OPEC de facto's leader and the world's largest crude oil exporter, maximized its exports by using an alternative pipeline route that bypassed Hormuz through the Red Sea. Even that was not enough to compensate for the extent of the disruption.

Enter the United States. The U.S., with the largest oil industry in the world - surpassing Saudi Arabia in 2018 and Russia in production - as well as the currency that underpins the global trading system has extraordinary influence over the energy markets. In some ways, this power is similar to OPEC’s historical ability to adjust output to global changes in supply and demand. Washington hasn't hesitated to use it.

OIL FIREPOWER U.S. Oil exports have surged in the past few weeks, helping to calm the acute energy shock coming from the Middle East. This includes the squeeze on refined products. According to Energy Information Administration data, the total U.S. exports of oil earlier this month reached a record high of 12,9 million bpd. Refined products made up over 60% of that figure.

According to Kpler, data analytics firm, seaborne U.S. crude oil exports will reach a new record of 9.6 million barrels per day in April. The flow to Asia is expected to nearly double from the pre-war level to 2.5 million barrels per day. This has cushioned Asian economies, which are among the most vulnerable to Gulf supply loss.

The Iran war brought a windfall to U.S. producers. According to ROI calculations the value of crude oil and refined products exports increased by about $32 billion in comparison with pre-war levels, increasing both corporate profits and tax receipts. The 'firepower' of American oil does not stop with production. Washington agreed to release 172 millions barrels of its Strategic Petroleum Reserve over several tranches until 2027, as part of an emergency global drawdown of 400,000,000 barrels.

By April 17, the?SPR was at 405 million barrels, down from the?415 millions barrels it had been at the beginning of the war. This means that the buffer against future supply shortages is still ample.

The United States has another tool at its disposal to influence the global energy supply: economic sanctions. The U.S. has eased restrictions on the purchase of Russian and Iranian crude oil. On April 17, the Trump administration renewed a waiver that allowed countries to purchase sanctioned Russian crude oil at sea. The waiver was valid for a period of about one month.

Impact was swift. The impact has been swift.

These measures, by boosting Moscow and Tehran’s revenues – even temporarily – undermine broader U.S. goals in foreign policy.

Recently, the U.S. government has retreated on a part of its strategy. The U.S. administration has recently retracted on part of this strategy. The balance of sanctions will always be delicate, balancing the need to exert pressure while limiting collateral damages on the global energy system. The U.S. still has the final say.

The Limits of Power

These measures, taken together, show that the U.S. is a "swing provider" de facto - and Uncle Sam can take away what he gives.

Donald Trump, the president of the United States, could, in theory, ban or restrict some products from entering the country. Energy exports are needed to reduce rising fuel prices in the U.S. This is a sensitive issue for politicians ahead of November's midterm elections. A move of this kind would almost certainly drive international energy prices higher. However, an export ban is unlikely. This would cause a severe disruption in U.S. oil refining and production systems, which are structurally geared towards exporting excess volumes. This would strain the relationship with our allies in Asia and Europe, who rely heavily on us to replace lost Middle Eastern oil barrels. It could also lead to retaliatory actions. It is clear that the U.S. has limited powers. The U.S. Energy Industry is still largely governed by the market economy, unlike OPEC or its wider producer coalition including Russia (OPEC+). Washington can't tell companies to increase or decrease output as it pleases, nor can they marshal production capacity like Gulf producers have done in the past. The U.S. can't fully?replicate OPEC as a manager for global supply.

It can respond quickly and at scale. Washington, through a combination public policy and private forces of the market, has helped ease some of the pain of consumers and revealed a market influence that is unmatched since OPEC was at its peak.

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(source: Reuters)