A Syria Strike Won't Spark an Oil Crisis

Experts explain why Saudi Arabia, North Dakota, and even Iran make a crisis "extremely unlikely."

It's the nightmare scenario: The United States strikes Syria, conflict spreads throughout the Middle East, the region's oil exports slow to a trickle and, soon enough, Americans are lining up to buy $9-per-gallon gas as their economy slides back into recession.

It's a scenario that's getting plenty of play as Congress weighs President Obama's request for a strike on Syria. Former Republican presidential candidate Newt Gingrich pivoted from the possibility of an energy crisis to call on Congress to force approval of the Keystone XL pipeline, while crude-oil prices have crept up this week, in part because of fears of Syria-induced shortage.

But for all the talk of a regional crisis, few — if any — prominent voices are explaining how missile strikes against Bashar al-Assad would translate into widespread oil shutdowns.

And that's for good reason: Regional experts agree that the Middle East's major energy powers — U.S. allies and enemies alike — combine to make the nightmare scenario more of a spook story than anything else.

Here's a look at those powers.

Syria

If Syria's civil war hasn't already sparked an energy crisis, U.S. intervention isn't going to make a difference, says Guy Caruso, George W. Bush's chief of the U.S. Energy Information Administration.

It has been two years since Syria has supplied oil to the global market, because international sanctions shut off the Assad regime's exports shortly after the start of Syria's civil war.

And even when Syria was sending supplies, it was hardly a major player, as it produces only 0.4 percent of the world's oil supply, much of which was consumed internally.

Any price effects from Syrian supplies are "already baked into the market," Caruso said. "It's almost impossible to assign any value to that."

Iran

If there's a wild card following a potential U.S. strike on Syria, it's Iran.

Iran's leadership has supported Assad throughout the civil war and has shown no signs of withdrawing that support, even though the Assad regime is facing evidence-backed accusations of using sarin gas to kill 1,400 of its own civilians.

And although years of Western sanctions have crimped Iran's oil exports, it still exports about 1.5 million barrels per day of crude oil. Much of that oil is consumed by China and India — and none by the United States. But because oil prices are based on global supply, if Iran shut off the spigot and its supplies went unreplaced on the global market, Americans would see pump prices climb.

There's a darker scenario as well: Iran holds one shore of the Strait of Hormuz, a maritime choke point at the mouth of the Persian Gulf that, at its narrowest, is only 21 miles wide. If Iran could somehow block exports from the strait, either with mines or direct strikes, it could shut the path that about one-fifth of the world's total oil consumption takes to the market.

But Iran is extremely unlikely to shut off its own supplies, and even more unlikely to tamper with the strait, says Alireza Nader, a senior policy analyst and Iran specialist at Rand.

"I think Iran would only block the strait under very dire circumstances, such as a direct attack on Iranian soil or a full embargo," Nader said.

Iran's economy is in disarray, and what little help it is getting comes in exchange for the country's already crimped exports. Shutting those exports off completely could put the country in economic free fall. Beyond exports, the strait is also the country's main source of imports, including the consumer goods the citizens of Iran are clamoring for.

For new Iranian President Hassan Rouhani — who thus far has sought to set a more moderate tone toward the West than his predecessor — sending his own people deeper into poverty would be politically perilous in the extreme.

And tampering with exports through the Strait of Hormuz would set Iran up for a military struggle with the West — as well as with a host of Arab states desperate to reap the revenue of their own exports — that the Persian nation could not win.

"Ultimately, Iran would be the loser in any military struggle," Nader said. "I just don't think a strike on Iran is going to precipitate that."

Iraq

A secondary threat comes from Iraq, whose oil exports — a decade after the U.S.-led invasion — are, at about 2 million barrels a day, again an important part of the global supply..

But those supplies are constantly threatened by the Iraq's hair-trigger internal tensions between Sunni and Shiite Muslims, who — along with a host of other factions — have been constantly grappling for power since the 2003 U.S.-led toppling of Saddam Hussein.

A U.S. strike against Assad's regime could inflame those tensions, sparking conflict in which any number of groups might seek to damage the wells and pipelines that take Iraq's oil to market, Caruso said.

But the impacts of sectarian violence in Iraq would have limited impact on the world market, said Caruso, who now works as a senior adviser at the Center for Strategic and International Studies.

"Pipelines get repaired pretty quickly," he said. "How much they could do is questionable."

And in the event of a small, short-term disruption such as the Iraqi scenario, there's reason to believe that another country — one that leads the world in oil exports — could make up the difference.

Saudi Arabia

In a time of rising oil demand and tight supplies, few countries have capacity to spare. Saudi Arabia is the exception.

The world's largest oil exporter, Saudi Arabia's total production has hovered around 9 million or 10 million barrels per day over the past year, Caruso said. And though there's no consensus figure, analysts widely believe Saudi Arabia could ramp up production to about 12 million barrels per day should its rulers choose to.

That additional 2 million to 3 million barrels could offset a complete shutdown of Iraqi exports, and even go a long way toward keeping crude prices stable in the event of a shutdown from both Iran and Iraq — a scenario that, again, the experts see as an extreme long shot.

Furthermore, the ruling Saudi regime is no friend to Assad. The country's foreign minister this weekend said Saudi Arabia would back a U.S. strike against the Assad regime.

And there's recent precedent for Saudi Arabia filling global supply gaps, such as when the kingdom ramped up production to offset falling exports from Libya during the civil war that ultimately toppled Muammar el-Qaddafi.

North Dakota

The oil-production boom in North Dakota and other states has gone a long way toward inoculating the United States against foreign oil shocks, Caruso said.

Those technologies include new methods for getting usable oil from shale, as well as from drilling new methods of locating reserves and new technologies to drill down to them.

"We're up about 2.5 million barrels per day than we were two years ago," he said. "That's not in response to the Middle East, it's in response to new technology here. If U.S. and Canadian production from these new technologies had not been there, we'd see a much higher price right now."

So, What Will Happen?

If Americans shouldn't start lining up at the gas station now, what effects on gas prices should they expect in the event of a U.S. strike on Syria?

Not nothing, but not too much, says Mohammed Akacem, an economics professor at the Metropolitan State University of Denver.

For Akacem, the most plausible scenario is one in which prices might rise sharply as traders hedge against the possibility of a crisis, however remote it may be, but he says any increases will quickly disappear after a strike.

That was the case in 1991, during the first war in Iraq, Akacem said. Prices spiked briefly as Saddam burned oil wells in an effort to deter the U.S. military, but Saudi Arabia stepped in and prices were back down even before the war ended, Akacem said.

"I think you might see a small spike," he said. "But then, when the world realizes 'Gee, everything is still there,' then we go back to business as usual."