No oil price shock due to ISIS

NEW YORK (CNNMoney) Oil prices have fallen sharply over the past few months — even though the terrorist organization ISIS has taken control of some refineries in Syria and Iraq.

Prices haven’t shot up since the United States and its allies have started to conduct airstrikes against ISIS oil targets in Syria either.

It may seem strange that prices haven’t skyrocketed.

Typically, tension in the Middle East has caused serious concerns about oil supply being taken off the market.

But experts say there are several reasons why the ISIS situation has not pushed energy prices up … and that the trend should continue.

ISIS supply disruption is minimal. While ISIS has made headway in eastern Syria and northern Iraq, it has not yet been able to take control of many oil properties in the southern part of Iraq. Unless ISIS does so, there is probably little reason to worry about global supply being cut.

“There has been no visible production decrease yet. ISIS has made a push for the south of Iraq and has not succeeded. And that’s where a significant portion of the country’s oil production and infrastructure is,” said Dan Pickering, co-president of Tudor, Pickering, Holt & Co., an investment bank that focuses on the energy industry.

ISIS profits on black market oil in Iraq

Pickering adds that Libya is starting to restart production of oil again in a major way. That should help boost supply and keep prices stable.

Strong dollar, weak Europe and China. Oil, like many other commodities, is priced in dollars. When the dollar is strong (as it is now) that makes the price of oil much more expensive in areas outside of the U.S.

That’s a problem for Europe in particular. Europe’s economy is showing serious signs of strain. There are legitimate concerns about deflation and another recession.