(Yahoo! Finance) - In Wednesday night’s address to the nation, President Trump declared, “We’re now totally independent of the Middle East, and yet, we are there to help.”
“We don’t have to be there — we don’t need their oil, we don’t need anything they have.”
These sentiments — which Trump has expressed many times in recent weeks — are a window into his worldview and his aim to make a clean exit from the war in Iran in two to three weeks.
But his assertions that the fate of the US won’t be impacted by disruptions to Middle East oil supply overlook key goods that come from the region and global energy interdependence, which anyone who has filled up a gas tank in the last month is all too aware of.
Trump is correct that the US doesn’t “need” oil from the region, as the US is a net exporter of both crude oil and natural gas.
But Americans will feel the effects of a global supply shortage no matter what.
The global nature of oil markets means that a shortage anywhere translates into rising prices not just in Asia, where most oil that passes through the Strait of Hormuz is sent, but around the world. Around a fifth of the world’s supplies pass through the 21-mile-wide waterway between the Persian Gulf and the Gulf of Oman.
Net exporter status “has essentially no impact on the prices Americans pay at the pump,” Clark Williams-Derry, an energy finance analyst at the Institute for Energy Economics and Financial Analysis, told PolitiFact in a recent fact-check of the Trump administration’s contentions around this issue.
Americans are now paying an average of $4.08 for a gallon of gasoline, according to the American Automobile Association, a jump of more than a dollar since hostilities began.
Trump is also overlooking that while the US is a net exporter of crude oil, it remains an importer of refined gasoline in many regions.
Closing the strait ‘may increase food costs and intensify cost-of-living pressures’
The president is factually wrong about other key goods that pass through the strait. Those shortages have already been felt directly in the US and indirectly through rising global prices for those goods.
Helium and fertilizer are two notable products made in high quantities in the region and relied on by US industries.
A recent report from the UN’s trade and development group also laid out the wide implications of a stoppage beyond just gas pump prices.
It noted the significant quantities of goods that pass through, such as the fertilizer farmers need for the current planting season and key chemicals.
The report found that the combination of higher energy, fertilizer, and transport costs could have global effects and “may increase food costs and intensify cost-of-living pressures, particularly for the most vulnerable.”
Helium is key to the production of semiconductors, and Qatar is the world’s second-largest producer. A global shortage is already being felt in Silicon Valley.
Economist Andreas Steno Larsen, founder of Steno Research, recently told Yahoo Finance that the helium shortage “could potentially turn into a bottleneck for the entire AI story.”
By Ben Werschkul - Washington Correspondent
