What does Iran mean for the gas pump?

One year ago, when oil was $140 a barrel and gasoline averaged $4.10 a gallon, what is going on in Iran today would have been the apocalyptic capper to a doom and gloom start to the summer. If you can recall (and strangely isn’t it hard to? It’s just one year) about one year to the day Congressmen were calling for an investigation into oil  prices and the LA Times was soberly detailing what would happen if oil hit $200 a barrel.Today, there is upheaval in a nation of 70 million people that is a member of OPEC, and which exports a large portion of the oil the United States needs to import. The market’s reaction? Yawn.

“We’re living in a new world of spare oil capacity,” Phil Flynn, energy analyst for futures brokerage Alaron Trading told me midday Friday. “There was a time when President Ahmadinejad giving a tirade would rally oil $5 because the world was so concerned of the ability to meet demand – OPEC couldn’t keep up, guys were worried Peak Oil had arrived – everything was just a panic.”

Now, the market is paying some attention, but just to pass the time:  ”Unless they take over the oil fields and cut off supply, then maybe there would be a problem.” But probably not. A year ago, “the market would have been up $10, $12 –  or more – immediately,” on simple fears of a disruption, Flynn says.

Last year, OPEC was churning out record oil of around 32 million barrels a day to try and meet demand not just from the U.S., which imports 12 million barrels a day, but also a go-go Chinese economy. Today, the cartel has been forced to cut back to just 26 million barrels and even that is too much for slackened demand caused by the economic recession. The current oil price of $72 many feel is too high given the state of the world economy and the significant amount of oil in storage. One potential result of the global excess of oil supply is that the U.S. may not be as hesitant to apply a little more pressure on Iran than it would be if we were in a state of high oil prices. Iran isn’t even high on the list of market worries: in recent months the market has lost more oil supply from upheaval in Nigeria than Iran even exports, so the action of the Ayatollah may mean a lot for democracy and even regional security, but not for the gas pump.

Kind of nice, for a change.