AVASH NEWS: USA Today reported that oil prices in the United States have risen again as hostilities between Iran and the US resumed and concerns over the security of energy shipments through the Strait of Hormuz intensified. Crude oil, the main benchmark of the global oil market, rose by $2.39 to reach $78.40 per barrel, an increase of about 3 percent.
Statistics released by the US Car Association show that the average gasoline price in the country has reached $3.87 per gallon, which is 70 cents higher than during the same period last year. This increase has come as the fragile ceasefire between Iran and the US appears to have collapsed.
Why Has the War in Iran Increased Fuel Prices in the US?
The United States was producing nearly 13 million barrels of crude oil per day as of January. The country exports more oil than it imports. However, domestic oil consumption remains extremely high, and the United States still imports about 6 million barrels of oil every day, only a small share of which comes from the Persian Gulf.
At first glance, it may seem that a war in the Middle East should not affect fuel prices in the United States. However, that assumption is incorrect.
Mark Zandi, chief economist at Moody’s Analytics, told USA Today that “the oil market is a global market. Therefore, oil prices rise everywhere. If an oil producer can sell its oil at a higher price in Rotterdam or Rio de Janeiro, it will naturally choose to do so.”
When the US launched its airstrikes against Iran, oil prices surged worldwide. According to the WTI index, the price of crude oil rose from around $67 per barrel on February 27 to approximately $105 per barrel by March 30.
The main reason for this increase was the growing risk of major disruptions to oil supplies in the region. These concerns included the possible closure of the Strait of Hormuz by Tehran, rising risks to seaborne oil transportation, and damage to oil infrastructure.
The United States is both the world’s largest oil producer and the world’s largest oil consumer, and American producers operate within this global market.
According to Zandi, oil production and consumption in the United States are roughly balanced. However, American producers ultimately sell their oil to whoever is willing to pay the highest price. They are driven by market incentives.
The US West Coast is more vulnerable to oil shocks originating in the Middle East because a larger share of its imported oil comes from that region.
Several countries that rely more heavily on Middle Eastern oil have already introduced energy-saving measures. Some have imposed fuel rationing, reduced the workweek to four days, expanded remote working, and urged citizens to reduce air conditioner use and rely more on public transportation.
