The oil crises of the 1970s taught Americans one of the iron laws of geoeconomics: that unrest in the Middle East can cause pain at the pump. But almost 40 years later, that law is blinding analysts to some of the most significant sources of market uncertainty -- which are right here at home. True, Iranian bellicosity and broader regional storm clouds are adding froth to oil prices. But even more striking is how much market-churning uncertainty is emanating from Washington and Brussels, rather than Caracas, Baghdad, or elsewhere in OPEC. The ambiguous economic trajectories and fluctuating policies of major energy-consumers like the United States, European Union, and China are proving at least as unsettling to oil prices as any decisions under the control of Middle Eastern officials.
Ask the leaders of OPEC what it's like to control the world oil market right now and they would probably laugh at your premise. Today's market jitters are largely beyond their control. The U.S. Federal Reserve's new open-ended commitment to expanding its balance sheet will likely push up the price of real assets like oil, even as White House chatter about dipping into the Strategic Petroleum Reserve (SPR) keeps the markets guessing about a sudden price collapse. At the same time, U.S. and European Union sanctions on Iran have crippled its oil exports, contributing to soaring oil prices and sparking demonstrations in downtown Tehran over the plunging value of the rial.