OPINION | Sidelined OPEC watches as US takes the world energy reins

The US has stepped in to shield the global economy from the oil crunch triggered by the Iran war by boosting exports, selectively easing sanctions and tapping strategic reserves. The conflict may be denting Washington’s standing in some quarters, but it is also cementing its transformation into the world’s dominant energy superpower.

Unlike in previous oil crises, the Organisation of the Petroleum Exporting Countries has been left largely powerless.

The near-hermetic closure of the Strait of Hormuz trapped 13 per cent of global oil supplies in the Persian Gulf and forced gulf producers to shut in around nine million barrels per day of output, stripping the group of its most potent lever: spare production capacity.

Saudi Arabia, the world’s top crude exporter and OPEC’s de facto leader, has maximised exports through its alternative pipeline route bypassing Hormuz via the Red Sea. But even that has been insufficient to offset the scale of the disruption.

Enter the United States. With the world’s largest oil industry – surpassing Saudi Arabia and Russia in production in 2018 – and the currency underpinning the global trading system, the US has extraordinary leverage over energy markets. This power is comparable, in some respects, to OPEC’s historic ability to recalibrate output in response to shifts in global supply and demand. And Washington hasn’t been shy about using it.