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Why the Iran War Should Not Cause Higher Gas Prices in the U.S.
(Newsweek) Frank N. Newman - America does not depend on oil sent through the Strait of Hormuz and its closure does not provide any good reason for U.S. consumers to face big increases in gas prices. The U.S. produces more oil than it needs and is a net exporter of oil. Problems in the Strait need not change the amount of oil produced in the U.S., nor the cost of pumping oil in the U.S., nor the amount of gasoline produced and used in the U.S. When prices recently increased for oil internationally, U.S. oil companies also raised prices stateside, but this makes no sense. The net result is that U.S. consumers pay more for gasoline, while American oil companies' production costs are the same, providing a huge profit windfall. There are differences in types of oil in the U.S., but that does not alter the logic. Most of the oil produced in the U.S. is "light." But some U.S. refineries use "heavy" oil. That means that the U.S. trades about 30% percent of its light oil for heavy oil, predominantly from Canada and Mexico. Under a long-term understanding between America and its oil companies, the companies are given many privileges, including on public lands, and they are supposed to provide reliable production for America's needs, at fair and reasonably stable prices. There is no legitimate basis for U.S. oil and gasoline companies to set prices in America any higher than they were last month. Once gas prices decline in the U.S., perhaps the IRGC will realize that keeping the Strait closed would harm China, India and Japan, not America - and they might reopen the Strait. The writer is a former Deputy Secretary of the Treasury under President Clinton.