Uncertainty looms amongst Americans as gas prices could be on the rise in coming weeks. Last week, United States President Donald Trump renewed economic sanctions against Iran’s energy, banking and shipping industries; the sanctions are intended to put pressure on Iran to curb its missile and nuclear programs, and to eventually dwindle Iran’s influence in the Middle East.
Although the national average gas prices per gallon are 24 cents higher than they were at this time last year, Americans have been spared much of the pressure from the sanctions. In fact, gas prices are five cents less than they were last week, and 15 cents less than they were a month ago. Oil markets globally have been expecting the pressure from the sanctions for months. Oil prices have been strained as prominent producers, including Saudi Arabia and Russia, have elevated oil exports to near-record levels, while economies such as China have doubted the demand prospects.
On Monday, Secretary of State Mike Pompeo stated that nearly twenty countries have already cut their oil imports from Iran, which has reduced purchases by more than 1 million barrels per day.
Sadad Ibrahim al-Husseini, former executive vice president at Saudi Aramco, addressed the concerns of U.S. citizens in an interview last week.
“I think there will be no impact on oil prices that can be attributed to the sanctions on Iran, because of an abundance of new supplies that have been made available from within OPEC and Russia as well as incremental offshore Brazil production and shale oil developments that can meet any level of oil demand over the next several years,” said al-Husseini.
However, according the The New York Times, some experts believe that oil supplies could become tighter over time, especially during the driving season next summer. These experts expect oil prices to skyrocket as demand increases and oil availability becomes scarce. Drivers are not the only portion of the United States population expected to suffer from the sanctions, aviation fuel prices are also predicted to increase, making travel more pricey. Lastly, electricity rates, prices for plastic and natural gas are also expected to increase.
There is a lot of controversy amongst experts surrounding what to expect in the months and years to come.
Matt Badiali of Banyan Hill is critical of research that shows there will be little or no increase in gas prices.
“The market is overestimating the amount of oil that could come on. Can the world produce an extra 500,000 barrels a day?” said Badiali. “I don’t see it.”
Furthermore, Badr H. Jafar, president of Crescent Petroleum, a company in the United Arab Emirates, concluded that Saudi Arabia might not be able to sustain its substantial output.
“With continuing production concerns in Nigeria, Venezuela, Angola and Libya, alongside Iranian curtailment, we could well see prices edging up again toward $80 [per barrel],” said Jafar.