What a prolonged war with Iran means for gas prices

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Oil and gas prices are rising as conflict in the Middle East intensifies, raising concerns at home about the cost of oil at the pump.

The national average for gas prices climbed to $3.45 a gallon this week, the highest level this year, according to AAA data.

Oil prices have rallied since the start of the Iran conflict, with benchmark US West Texas Intermediate crude futures (CL=F) up more than 50% this week to over $100 a barrel. Brent crude futures (BZ=F), the global benchmark, also rose this week.

As a result of the attacks, shipping companies halted operations and ships that were originally traveling through the Strait of Hormuz – an important route for transporting the world’s oil, as about 20% of the world’s oil supply passes through it every day. Roadblocks could quickly affect global oil prices.

Analysts warn that a prolonged war with Iran could push up energy prices. Both Brent and WTI crude oil rose above $100 a barrel for the first time since 2022 on Sunday after Russia launched an attack on Ukraine.

As a result, these high pressures abroad can have real effects on fuel costs for US drivers at home.

“That’s what’s going to affect gas prices starting today,” Patrick de Haan, head of petroleum analysis at GasBuddy, told Yahoo Finance on Feb. 2. “The national average will start to rise. We could see gas prices go up around noon or even in the evening because gas stations themselves are charging higher prices in exchange for higher prices.”

This comes amid a seasonal increase in gas prices, DeHaan said, as much of the country has already begun transitioning to cleaner, more expensive summer gas blends.

Climate Impacts, In addition “Attacks on Iran will certainly cause many motorists to expect higher gas prices here, not just in the next few days, but in fact in the next few weeks, if not two or three months.”

While the United States is technically the world’s top oil producer, accounting for about 22% of global oil production, the Middle East plays a major role, accounting for nearly a third of global oil production, and Iran is one of the top 10 oil producers.

According to Hahn, the biggest risk to oil prices is the Strait of Hormuz. This strait between Iran and the United Arab Emirates is the most important route for the distribution of oil in the world. According to the US Energy Information Administration, about 20 million barrels of crude oil and petroleum products pass through the strait each day.

However, boat traffic was halted after Iran’s Revolutionary Guard threatened to shoot any boat that tried to pass. Considering that Iran’s oil production accounts for more than 4% of the world’s oil production and that the strait that connects the world’s other major producing countries with the rest of the world is located on its border, such a disruption would disrupt the global market and lead to severe supply chain disruptions.

The United States has been worried about the gas crisis of the 1970s, when oil-producing countries that were part of OPEC imposed sanctions on the United States and other countries, which raised the price of oil and led to gas shortages. The Iranian revolution in 1979 further reduced supply, driving prices even higher.

On a larger scale, geopolitical tensions can have serious effects around the world, as oil prices are assessed globally and driven by supply and demand, as well as by speculative investors who can drive prices up or down. This can affect the wallets of everyday consumers.

check in: Who sets fuel prices? Inside the wild world of energy trading.

So far, the national average price of regular gasoline is $3.45, up from $2.98 a week ago and $2.90 last month, according to AAA.

It is difficult to predict exactly how gas prices will move in the coming days, weeks and months; However, consumers should be aware of changes in oil prices, OPEC official statements, US sanctions or policy changes, and shipping activities to determine whether their daily costs are sustainable.

In the meantime, there are also moves you can make to save money when you fill up.

Fill up now if prices go up: Don’t wait for prices to rise. If you have an empty tank, fill it up now to take advantage of the lowest possible price.
Use gas price comparison apps: Finding the lowest gas prices in your area is easy with apps like Gas Buddy and Gas Guru. Sometimes, taking a few extra minutes to compare prices in your area can save you a few cents per gallon.
Join the Fuel Rewards Program: Loyalty to a particular gas station chain can help you get a discount on every gallon of gas.
Prevent optional driving: Carpooling, bicycling, and walking can help reduce fuel consumption during peak hours.