What happens when “Death to America!” meets “Drill, Baby, Drill”?
The Iranian regime is finding out right now, and it’s not good news for Tehran — or Beijing.
After the U.S. and Israel began their most recent military actions against Iran’s Islamist government, Ebrahim Jabbari, an adviser to the IRGC commander-in-chief, issued a familiar warning:
“The Americans, with debts of thousands of billions of dollars, are dependent on the region’s oil, but they should know that not even a drop of oil will reach them.”
It harkened back to the 1979 oil crisis — sometimes called the “Second Oil Shock” — when the Iranian Revolution toppled the Shah and caused a massive spike in global oil prices.
Before the revolution, crude oil cost about $14 a barrel ($63 after adjusting for inflation). In 1980, that price jumped nearly 300 percent to nearly $40/barrel, or roughly $110 today.
But this is not your grandfather’s global energy economy. In the week after the first strikes on Iran, oil prices only rose about 17 percent.
“Several clear indicators show the United States is structurally far less vulnerable today than in 1979,” says Alex Stevens of the Institute for Energy Research.
The biggest reason is the surge in energy production in North America.
In 1979, about 40 percent of the world’s oil exports traveled through the Straits of Hormuz. Today, that number is closer to 20 percent.
As recently as a decade ago, the U.S. was getting about 25 percent of its crude oil imports from Persian Gulf countries. Today, it’s about eight percent.
America and its North American partners Canada and Mexico have turned the continent into an energy giant, one that can shrug off 1980s-style oil shocks. U.S. production remains near record levels at about 13 million barrels per day.
And then there’s America’s Strategic Petroleum Reserve, which holds roughly 415 million barrels of crude.
It’s true that gasoline prices have spiked in the days after the military strikes on Iran began, and the future of the conflict withIran is uncertain.
“Further escalation, including additional attacks on producers or infrastructure, could amplify secondary effects, especially from elevated transport costs,” Stevens said. “Markets are currently betting on a multi-week rather than indefinite disruption.”
Energy Secretary Chris Wright agrees, telling Americans they will see a “transient bump” in fuel prices.
“This will definitely be temporary,” Wright said. “The Trump administration’s energy dominance agenda has massively grown global supplies of oil and natural gas.”
The White House also announced steps to protect shipping in the Persian Gulf. The U.S. International Development Finance Corporation is offering political-risk insurance to shipping companies operating in the conflict zone after insurers pulled back war-risk coverage. The U.S. Navy is also expected to escort tankers through the Strait of Hormuz to safeguard energy shipments.
Not that the era of “oil shocks” is over. Just ask China.
While the United States has expanded domestic production and strengthened its position in global energy markets, China faces a more complicated situation.
Beijing recently ordered refiners to suspend exports of diesel and gasoline while allowing limited jet fuel shipments — a move analysts say suggests concerns about domestic supply as tensions rise.
Energy analytics firm Kpler estimates China purchases more than 80 percent of Iran’s exported crude oil, often at steep discounts. At the same time, China imports significantly larger volumes from Saudi Arabia and other Gulf producers whose interests diverge sharply from Tehran’s.
China has also invested diplomatic capital in the Middle East. In 2023, Beijing brokered an agreement restoring relations between Saudi Arabia and Iran after the two countries severed ties in 2016.
For the U.S. and the West confronting China’s expansionist foreign policy, the impacts of military action on Iran have been a plus.
“This was a real diplomatic win,” said foreign policy expert Wesley Alexander Hill of the International Tax and Investment Center. “It came out of the blue.”
Questions have also emerged about Chinese-exported military technology following a U.S. raid in Caracas on Jan. 3 that resulted in the capture of Venezuelan President Nicolás Maduro.
Venezuela’s air defense network — which includes Chinese radar systems — appeared unable to effectively detect or challenge the incoming U.S. aircraft and helicopters. Analysts say the episode highlights the challenges lower-tier military systems can face when confronted with advanced electronic warfare.
“It is very difficult to determine how this will impact the global chessboard,” Hill said. “But it isn’t impossible that (events in Iran) force a reevaluation of Chinese military thinking.”
