World oil markets have been up and down since Saturday night’s U.S. attack on Iran’s nuclear facilities.
At midday Monday, oil prices on world markets for the benchmark West Texas Intermediate crude were trading just below $74 a barrel, about $1 per barrel lower than what they were on Friday before the bombing took place.
But because of the uncertainty of supply disruptions and Iran’s strategic importance as an energy supplier, prices could increase.
However, oil analysts are cautiously optimistic energy supplies will remain steady, and price increases will rise only temporarily, providing the conflict does not spread.
Industry analyst Tom Kloza, the chief market analyst at the energy consulting company Turner Mason, believes the U.S. airstrikes alone are not likely to cause a huge spike in energy prices, provided Iran’s energy production is not disrupted.
“I’d be surprised if these increases we’re seeing turn into larger increases or they are sustained,” Kloza said, “Now, you know, things can happen. This is war, and there’s a lot of different things that one can’t predict.
He said the biggest thing to watch is whether the Iranians levy any kind of assaults on U.S. assets, and then if the United States or Israel takes out a terminal known as Kharg Island, which is where all the exports of Iranian oil are moved out of. “If Iran tries to shut down the Strait of Hormuz, I think probably you’d see a military action to knock out Kharg Island,” he said.
Oil analyst Phil Flynn with PRICE Futures Group said that while some Iranian officials may want to close the critical Strait of Hormuz, he doubts that will happen because Iran desperately needs oil revenue to keep its struggling economy going, which has been damaged by economic sanctions.
“Because their only form of revenue is oil and if they cut off the Strait of Hormuz, who is going to buy their oil?” Flynn said. “Militarily, I don’t think anybody believes they could actually pull that off.”
According to AAA, gasoline prices remain less expensive now than what they were a year ago. The average cost for a gallon of regular unleaded is $3.22 a gallon, compared with $3.44 a gallon a year ago. A week ago, a gallon of unleaded cost $3.14.
While gasoline prices have inched up only fractionally, there is another concern, and that is the price of diesel fuel, which is a key component of the trucking and airline industry.
“Diesel prices are going to be the ones that are going to be feeling it most. That means the truckers and the diesel buyers,” Flynn said.
According to the Energy Information Administration, diesel prices saw a significant week-over-week increase last week. The national average on-highway diesel price rose 10 cents to $3.57.
“Diesel has been roaring higher, and it really could impact the world, going forward,” Kloza said, explaining that the increase is based in part on high demand for the fuel, especially in transportation, agriculture and construction and increased refining costs as ultralow sulfur diesel costs more to refine to comply with environmental regulations.
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