The United States began exporting gas in late 2008. For decades prior, starting in 1960, the country used all the gas it produced here plus had to import gas from places in Europe. But demand for gas has dropped nearly 10% in recent years. It went from a peak of 9.6 million barrels a day in 2007 to 8.8 million barrels today, according to the EIA.
The drop was caused partially by the recession but also by the advent of more fuel efficient vehicles, higher prices and the greater use of ethanol as an ingredient in gasoline. Demand for other products made from crude oil like diesel and jet fuel has also declined, although not as much.
To be sure, the United States is still importing plenty of oil to make that gasoline -- and is still dependent on foreign countries for well over half the crude it uses. But now the country's massive refining infrastructure is producing more gasoline, diesel and jet fuel than the United States needs, freeing it up to be exported to places like Brazil, Mexico and Chile where demand is still strong.
Iranian President Mahmoud Ahmadinejad last week completed his tour of Latin America -- taking in Venezuela, Cuba, Nicaragua, and Ecuador -- as tensions between his own country and the West considerably deteriorate.
The problems are primarily centered on Iran’s alleged quest to build a nuclear weapon, a point of laughter between Ahmadinejad and Venezuela’s President Hugo Chávez last weekend. “Ahmadinejad and I are going into the … basement now to set our sights on Washington and launch cannons and missiles,” Chávez said laughing with Ahmadinejad at his presidential palace in Caracas.
The International Atomic Energy Agency (IAEA) is taking the threat of an Iranian nuclear bomb a little more seriously. The agency's August 2011 report declaring its “serious concerns” about Iran’s nuclear program was denied by the Iranians, though it spurred Washington on New Year’s Eve to sign its toughest sanctions yet on Iran.
In response to heightened rhetoric from Washington, Tehran has threatened to shut the strategically important Strait of Hormuz, the choke point for one-fifth of the world’s oil. This could have huge consequences for the world’s markets.
The price of a barrel of oil could double to more than $200, which would lead the US to open up its strategic reserves, as well as spur the International Energy Agency (IEA) to release up to 14 million barrels per day of government-owned oil. The move by Tehran could cripple countries such as China, India, Japan, and South Korea, which rely on supplies from the Persian Gulf.
In the United States some cities could experience record prices by Memorial Day, GasBuddy says, with Chicago residents paying up to $4.95 a gallon and New Yorkers shelling out up to $4.55.
But other analysts say consumers may get some relief in the months to come.
Richard Soultanian, co-president of NUS Consulting, said that barring a confrontation with Iran or some other disruption in the Middle East, some of the current risk premium in the market "is going to be leaking out." That should bring gas prices back to the low $3 range, he said.