410
9 days ago
Why gas prices could top $5 again if the Iran war drags on
Summary
The longer the war in Iran lasts, the higher gas prices will rise back in the U.S. For drivers, that leaves the question of just how much pain they’ll feel at the pump—and when.
Several industry experts have already placed their bets, with estimates ranging from $5 to $5.50 if the price of Brent crude oil, the international benchmark, hits $150 a barrel. For gas, that’s an increase of around 50% from the current national average of $3.36, according to Gas Buddy.
While $150 oil may sound like a wild assumption—now it’s just north of $90 a barrel—that price was even floated by Qatar’s energy minister, Saad El-Kaabi, after an Iranian drone strike on Monday forced the oil-rich Gulf nation to shutter its largest liquefied natural gas plant.
The energy minister, in an interview with the Financial Times, suggested that the rise to $150 a barrel could happen quickly. “Everybody’s energy price is going to go higher,” he added.
Combined with the effective closure of the Strait of Hormuz—some 20% of the world’s oil traverses through the narrow waterway—$150 oil may not be so far-fetched.
“A few weeks of Hormuz closure will create a domino effect of events that could push crude to $150 or higher,” Macquarie analysts wrote in a Friday research note.
“Without an agreement and a fast cessation of all kinetic activity, the crude market will begin to break in days, and not in weeks or months,” the analysts added.
But $150 oil is still a big “if,” noted Patrick De Haan, GasBuddy’s head of petroleum analysis.
“I don’t really know if we’ll get to that $150 level, but we could get closer—all depends on how long the situation lasts,” De Haan told Barron’s.
If oil does hit that price, De Haan estimates that gas will average between $5 and $5.50 a gallon.
One way to game out the potential impact that an extended war could have is by comparing the current situation to the summer of 2022. That’s when gas prices hit a record high after Russia invaded Ukraine and the U.S. sanctioned oil from Russia.
Notably, it took 110 days from Russia’s invasion on Feb. 24, 2022, for gas prices to peak at $5.01 on June 14, 2022. By comparison, oil prices never rose above $130 a barrel back then.
But even if oil hit $150 a barrel next week, it would probably take months for that price jump to show up at gas stations There’s a lag from when oil is produced to when it actually makes it to the pump after being refined, blended, and transported.
If the Iran war goes on for several months, the price of a gallon of gas could very well top the all-time high set four years ago.
“I think that, yes, the $5.01 national average will likely be eclipsed,” Denton Cinquegrana, chief oil analyst at OPIS, told Barron’s. Dow Jones is the parent company of both OPIS and Barron’s.
Drivers have already seen gas prices spike, from just under $3 a gallon before the U.S. airstrikes last week to $3.36 a gallon on Friday, according to GasBuddy. That’s a 13% jump.
That stings, but the worst could be ahead. If “this thing goes on for 106 days we are going to wish we were at $5 a gallon,” OPIS’s Cinquegrana said.
Write to Anita Hamilton at anita.hamilton@barrons.com
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
Download the Mint app and read premium stories
Several industry experts have already placed their bets, with estimates ranging from $5 to $5.50 if the price of Brent crude oil, the international benchmark, hits $150 a barrel. For gas, that’s an increase of around 50% from the current national average of $3.36, according to Gas Buddy.
While $150 oil may sound like a wild assumption—now it’s just north of $90 a barrel—that price was even floated by Qatar’s energy minister, Saad El-Kaabi, after an Iranian drone strike on Monday forced the oil-rich Gulf nation to shutter its largest liquefied natural gas plant.
The energy minister, in an interview with the Financial Times, suggested that the rise to $150 a barrel could happen quickly. “Everybody’s energy price is going to go higher,” he added.
Combined with the effective closure of the Strait of Hormuz—some 20% of the world’s oil traverses through the narrow waterway—$150 oil may not be so far-fetched.
“A few weeks of Hormuz closure will create a domino effect of events that could push crude to $150 or higher,” Macquarie analysts wrote in a Friday research note.
“Without an agreement and a fast cessation of all kinetic activity, the crude market will begin to break in days, and not in weeks or months,” the analysts added.
But $150 oil is still a big “if,” noted Patrick De Haan, GasBuddy’s head of petroleum analysis.
“I don’t really know if we’ll get to that $150 level, but we could get closer—all depends on how long the situation lasts,” De Haan told Barron’s.
If oil does hit that price, De Haan estimates that gas will average between $5 and $5.50 a gallon.
One way to game out the potential impact that an extended war could have is by comparing the current situation to the summer of 2022. That’s when gas prices hit a record high after Russia invaded Ukraine and the U.S. sanctioned oil from Russia.
Notably, it took 110 days from Russia’s invasion on Feb. 24, 2022, for gas prices to peak at $5.01 on June 14, 2022. By comparison, oil prices never rose above $130 a barrel back then.
But even if oil hit $150 a barrel next week, it would probably take months for that price jump to show up at gas stations There’s a lag from when oil is produced to when it actually makes it to the pump after being refined, blended, and transported.
If the Iran war goes on for several months, the price of a gallon of gas could very well top the all-time high set four years ago.
“I think that, yes, the $5.01 national average will likely be eclipsed,” Denton Cinquegrana, chief oil analyst at OPIS, told Barron’s. Dow Jones is the parent company of both OPIS and Barron’s.
Drivers have already seen gas prices spike, from just under $3 a gallon before the U.S. airstrikes last week to $3.36 a gallon on Friday, according to GasBuddy. That’s a 13% jump.
That stings, but the worst could be ahead. If “this thing goes on for 106 days we are going to wish we were at $5 a gallon,” OPIS’s Cinquegrana said.
Write to Anita Hamilton at anita.hamilton@barrons.com
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
Download the Mint app and read premium stories
AI Description
The article discusses the potential impact of the ongoing conflict in Iran on global crude oil prices and subsequent U.S. gas prices. It highlights the possibility of gas prices exceeding $5 if the conflict persists and oil prices reach $150 per barrel.