It’s the question of the day, month, year.  No one knows for sure given the unstable situation in Iran.

The trend is in the right direction. As the chart below shows, the oil price was close to $64 a barrel before the Iran conflict (in real terms near a 30-year low back in January), and then soared to above $100 a barrel in March. Since then, the price has slid down to the current price of roughly $74 a barrel today.

Global production has fallen by roughly 2.2 million barrels a day from the 77 mbd back in February. This means a 3% fall in supply raised prices at the pump by about 16%. This also hopefully means even small increases in supply can lead to big price reductions at the pump.

The chart below shows which countries have experienced the biggest reduction in output – almost all of them in the Middle East. The good news is that OPEC is still powerful, but no longer has the market dominance it once had to maximize profits by reducing production.  This is in large part due to the shale energy revolution in the U.S., combined with Trump’s drill baby drill strategy.

The optimal energy strategy for the U.S. – especially when prices are relatively high – is to produce as much oil and gas from every nook and cranny here in the USA. If oil-rich California would get with the program, the U.S. could be consistently producing more each day than Saudi Arabia and Russia combined.

Get going Gavin!