Here We Go With Volatile Oil Prices … Again

Here We Go With Volatile Oil Prices … Again


We may be headed into a new year, but some news just doesn’t change. Oil prices are shaping up for another roller coaster year thanks to ongoing tension between the U.S. and oil-producing interests in the Middle East.

The latest culprit is Iran and their ever-sour relations with the United States over the issue of nuclear weapons. To prevent Iran from obtaining or funding a nuclear weapon, the U.S. threatened to take the lead on imposing tough sanctions on the Middle Eastern nation. The sanctions will most likely have the backing of several other nations in the global community.

Iran fired back saying that if the sanctions are to take effect, then they will close access to the Strait of Hormuz. The waterway is an important shipping channel situated between Iran and Saudi Arabia that helps deliver at least 20 percent of the world’s oil. On Wednesday, Iran’s naval leadership reinforced its ability to completely close and protect the waters with military force.

You know what that means, right? From there, oil prices spiked to over $100 per barrel just before Christmas. Oil-producing Arab nations followed by assuring they would take up the slack for whatever oil output they would lose from Iran. Prices then fell slightly as market fears were eased a bit.

Crude oil still topped out at over $99 per barrel in trading last week. Only time and the news cycle will tell if we should look for more jumps or free falls. Prices have remained above $90 per barrel for much of the Fall.

The question on many U.S. consumers minds is not concerning the geopolitical consequences of sanctions – you don’t hear folks talking about what the deal is with Iranian President Achmadinejad in the barbershop. Ultimately, average folks want to know the effect on gas prices.

It seems that it takes a mere threatening headline to ripple through global media outlets for oil and gas prices to spike uncontrollably. As of Wednesday, the sanctions against Iran have not taken effect. As usual, it’s rampant speculation that is driving oil traders to react before there is news.

The U.S. government should to look at this situation and see its realities. That’s when the conversation – and maybe some action – starts when as a nation, we put forth a strong effort to drill for oil from our own shores and/or invest in cleaner energy technologies. Sending U.S. consumers through the ringer with volatile prices is not a real strategy, politically or economically.

Economists say that oil and gas prices have a direct effect on our economic recovery since transportation costs factor heavily into household budgets. In addition, if a strong economy is in our best national security interest, then we need to take more actions to promote our energy independence. It’s not a selfish act, but rather an economically smart move to not tie up all of our energy needs in the affairs of other sovereign nations.

In 2012, will the push for the U.S. to keep a free flow of Middle Eastern oil outweigh its respect for the American consumer and economic recovery?



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