The dramatic rise in oil and gas prices following the outbreak of the Iran war has raised new questions about President Donald Trump’s claims over the years that the United States has achieved energy independence.
The fact that the closure of the Strait of Hormuz could raise domestic gas prices shows that U.S. households are vulnerable to changes in energy markets all over the world.
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It is true that during the first Trump administration, the U.S. began, for the first time in decades, producing more energy than it consumed and exporting more energy than it imported.
But that is not the same as saying that the U.S. does not need oil, gas, and other forms of energy from abroad.
For complicated reasons, Americans still rely on imported fuels. And household costs can go up or down based on events in the Middle East, Russia, China, and other places.
Leading up to the start of the war, crude oil prices were around $70 per barrel, with Brent Crude selling at $72 and West Texas Intermediate at $67. As of Tuesday, both benchmarks settled around the $100 line, with Brent priced at $103.20 and WTI selling at $95.54.
Meanwhile, gasoline prices had been sitting nicely below $3 a gallon, with the average price at the pump around $2.92 one month ago. That average shot up to $3.79 on Tuesday.
That’s not because fossil fuel production suffered under President Joe Biden. In fact, production of oil and natural gas hit record levels — a phenomenon that is awkward for both parties to discuss. Republicans don’t like to mention it because it doesn’t fit neatly into the argument that Biden harmed the industry. And Democrats don’t want to talk about it because many environmentalists want them to crimp fossil fuel production.
Here is the reality of U.S. “energy independence.”
What is ‘energy independence’?
Energy independence generally means that a country produces enough energy to meet its own domestic needs.
Trump signed an executive order in his first term promoting U.S. energy independence as a goal.
As oil and gas production — and exports — grew, the Trump administration increasingly set a new goal: energy dominance, meaning that the U.S. would not only meet its own needs but also export energy all over the world.
Is the US energy independent?
The U.S. is energy independent in two different senses.
The first is that the U.S. produces more energy than it consumes.
That has been true since 2019, after many decades in which consumption outpaced production, according to the Energy Information Administration.
The second is that it exports more energy than it imports. That also became true in 2019 after nearly seven decades.
“Thanks to President Trump’s energy dominance agenda, the United States is totally energy independent,” White House spokeswoman Taylor Rogers said in response to a request for comment. “Unlike some of our allies, America is a net exporter — not a net importer — of oil and gas, ensuring families and businesses don’t have to worry about long lines at the gas pump or power blackouts. This is a complete reversal from Joe Biden’s so-called ‘green energy’ policies that stifled the production of affordable, reliable, and secure energy sources. While these short-term disruptions in the global markets can make oil prices temporarily spike, the United States is not at risk of a supply shortage.”
How did production overtake consumption? Was it Trump?
First, it is worth noting that consumption has not grown in recent years: 2024 consumption was below the 2008 level, according to the EIA.
But energy production exploded in the 2010s after decades of stagnation, driven by the shale oil revolution.
Thanks to the adoption of new hydraulic fracturing (“fracking”) methods of drilling, the industry was able to massively ramp up production, with drilling booming in Texas, North Dakota, and elsewhere.
The nation became the world’s top producer of natural gas in 2009 and the top oil producer in 2018.
The growth of oil and gas production helped offset a decline in coal production.
Meanwhile, hydro and nuclear power have been stagnant. Renewable energy sources, such as wind and solar, have grown in recent years.
In both of his terms in office, Trump took steps to promote oil and gas, but the growth in production predates him.
Biden, meanwhile, implemented measures meant to move the U.S. away, over the long term, from fossil fuel production and toward renewable energy sources. While the use of coal continued to decline during his tenure, though, oil and gas production reached new records. After prices soared in the wake of Russia’s full-scale invasion of Ukraine in 2022, his administration encouraged drillers to produce more. The U.S. was a net exporter of energy throughout his term in office.
How and why did the US start exporting so much energy?
The major factor behind the rise of U.S. energy exports has been the shale revolution.
The U.S exports natural gas in the form of liquefied natural gas — that is, gas frozen and then shipped as a liquid via ship.
The first shale-era shipment of LNG left the Sabine Pass terminal in Louisiana in 2016. By 2023, the U.S. had eclipsed all other nations in exports.
For decades, oil exports were essentially banned under the Energy Policy and Conservation Act of 1975. In December 2015, Congress voted to end the ban, and exports subsequently soared.
Trump has championed fossil fuel extraction and exports every step of the way.
Biden, on the other hand, put a pause on the approval of new LNG export terminals.
So why is the Iran conflict raising US prices?
Although the U.S. produces a tremendous amount of oil on its own, prices are set on the global market.
“Oil is a fungible commodity,” Matthew Bernstein, vice president of North America oil and gas analysis at Rystad Energy, told the Washington Examiner. “And that means that its prices are set on a global market.”
Because traders, to an extent, can source barrels from different countries, a decline in supply from one area, such as the Persian Gulf, can drive up bidding for barrels from elsewhere.
Before the conflict, about 20 million barrels of oil passed through the Strait of Hormuz every day, about a fifth of global demand.
Erik Johnson, a senior economist for BMO Capital Markets, wrote in a research note Tuesday that “the disruption has likely removed 180–250 million barrels from global supply.”
To the extent those barrels have been replaced by supplies from elsewhere, they have driven up prices.
That includes gas prices in the U.S.
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Crude oil accounts for about half of the cost of gas at the pump, according to the EIA.
Why does the US need to import oil at all?
While the U.S. produces massive amounts of oil, the specific kind of oil that is drilled in Texas and elsewhere might not be the exact type that domestic refineries are set up to receive and turn into gasoline, jet fuel, and other products.
“A lot of our refineries on the Gulf Coast are set up to handle heavy crude oil, which is typically imported from places like Canada, from Venezuela, whereas the crude that is overwhelmingly pumped in the U.S., specifically in the Permian, is light crude, which means that a lot of those volumes actually get exported,” said Bernstein.
Many U.S. refiners in the Midwest and Gulf Coast built expensive facilities before the shale oil revolution, and those refineries are not equipped to process the light crude produced by frackers. Instead, they are configured to process heavy crude from Canada and Latin America.
Canada provides about half of U.S. imports.
Meanwhile, the U.S. exports about a third of the crude oil it produces, mostly to Asia and Europe.
Is the US better off now than it was?
To be sure, the U.S. is better prepared now than in past years to weather an oil price shock from the Middle East.
In 1973, several Arab OPEC nations placed an embargo on oil to the U.S. as reprisal for backing Israel in the “Yom Kippur” War. The embargo caused what is now known as an oil crisis, with the price of a barrel of oil quadrupling. The shock caused shortages and lines at gas stations, and the soaring prices contributed to “stagflation” of the era that saw both high inflation and weak growth.
The greater relative U.S. production today does cushion the blow to global markets from the cutoff of supplies from the Persian Gulf.
Also, domestic production will ramp up if prices remain high.
“It’s realistic, in the sense that if you see sustained high prices, companies could increase their rigs,” Bernstein said. He said U.S. producers could add nearly 200,000 barrels per day of production over the course of 2026, although that is not the base case.
Another factor buoying the U.S. is that “the U.S. economy is less energy intensive,” Robert Kavcic, a senior economist with BMO Capital Markets, wrote in an analysis. The U.S. requires 0.7 barrels of oil to produce $1,000 of real gross domestic product. It required the equivalent of two barrels in the 1970s.
For natural gas, the U.S. is in even better shape.
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“Unlike oil, where prices are set based on global supply and demand, natural gas prices in the U.S. are completely isolated, or not completely, but largely isolated from global swings,” Bernstein said.
U.S. natural gas prices have seen only modest changes since the start of the conflict despite the loss of supplies from major producer Qatar.
