No Dependancy on Foreign Oil

According to the U.S. Department of Energy, gas prices have recently increased in response to uprisings within several Middle Eastern countries. The events have interrupted production of crude oil in the region resulting in a jump in the average price per gallon of gas in the U.S. As of mid-February 2011, the average price of regular gasoline has reached $3.19 per gallon—up approximately 20% from mid-February 2010—and the highest price level seen within the month of February since 1990. Experts in the energy industry generally report that gas and oil prices will continue to increase as the oil production of Middle Eastern countries continues to be disrupted by political revolts. Energy experts estimate that the price of oil may reach nearly $220 per barrel and gas up to $5.00 per gallon.

Although the protests in Egypt have subsided, political protests are continuing in Libya and Bahrain. Libya, in particular, is a large exporter of crude oil. The majority is exported to Europe, some of which is then exported to the United States. However, this accounts for a small percentage of the overall U.S. oil importation. A more significant impact on the oil market has resulted from the general concern that unrest could spread to Middle Eastern countries that supply larger quantities of oil to the U.S.—in particular Saudi Arabia.

A mitigating effect on any disruption of crude oil importation from the Middle East involves the fact that the United States Department of Energy maintains an emergency fuel store of oil—the Strategic Petroleum Reserve. Consisting of 727 million barrels, it is the largest emergency oil supply of any country. However, the U.S. does not have a similar emergency supply of gasoline or diesel fuel.
Past history suggests that Americans will generally alter their driving habits when gas reaches $4.00 per gallon, which may occur by midsummer 2011. Discretionary spending habits of Americans also are impacted at this point, which could negatively impact the economic recovery.

As described, the recent and continuing protests in the Middle East are having a direct impact on gas prices within the U.S. If protests spread to additional Middle Eastern countries (some of which may be large suppliers of oil to the U.S.), then additional significant increases in gas prices will likely be experienced into mid-2011.