Why is oil responding differently to geopolitical risk and conflict in the Middle East? America’s shale revolution has changed not only the physical balance in the market but also the geopolitical and psychological balance. The growth of U.S. crude production has been a stabilizing factor for the oil market in a geopolitically unsettled world, says Daniel Yergin, a Pulitzer-prize winning energy expert.

The market’s ability to adjust to disruptions such as the recent Iran-Israel tensions has been extraordinary, Yergin said in an interview. The price of Brent crude, the international benchmark, breached $90 a barrel before Iran’s attacks on Israel this month, but has since fallen back to about $86 per barrel. 

The relative calm reflects two forces effectively pulling in opposite directions, Yergin said. While surging U.S. production weighs on prices, OPEC+ is trying to keep them in the $80s. OPEC+ includes the original Saudi Arabia-led OPEC cartel in a loose alliance with Russia and other producers. Sheer expectations are again for the U.S. to grow about 400,000 barrels a day. The U.S. is still growing and is far and away the world’s largest oil producer. 

The biggest preoccupation of the energy markets is whether turmoil in the Middle East will affect energy supplies, actually disrupt energy supplies. You saw some disruption that came with the Houthis disrupting shipping through the Red Sea, but the market adjusted. You saw a disruption coming, going back with the restrictions on Russian oil. But the big question will be, will there be stability or is it just another calm between the storms?

“We’ve moved from one era to another. The era of pretty unfettered globalization of supply chains, based only on efficiency – that era is over. And we’re in a world in which trade and economics in general is more politicized and more risky for both companies and for investors. Many companies have operated by the playbook of globalization. But that playbook doesn’t work so well in the new game that we’re now living in,” Yergin said.

/Barron’s, Daniel Yergin, vice chairman of S&P Global, is the author of “The New Map: Energy, Climate, and the Clash of Nations.”/