The escalation of U.S.-Iranian hostilities last week pushed world oil prices higher immediately, and metro Atlanta gas prices rapidly followed suit.
But the increases were modest and could be temporary, analysts say.
The global price of oil jumped roughly $4 a barrel on Friday, then slipped back on Monday. The average price of gas in metro Atlanta rose 3 cents a gallon to nearly $2.47, before falling by a penny a gallon, according to AtlantaGasPrices, a GasBuddy subsidiary.
“The first reaction Friday was an emotional response only,” said Patrick DeHaan, head of petroleum analysis at Gas Buddy. “It was because of the unknown.”
Oil is the most important component in gasoline, and the cost of it is the largest factor in gas prices. When there is a crisis in the Middle East, drivers often see local price hikes.
Generally, the price of Atlanta gasoline slides down through the winter, reaching a seasonal low in late February before slowly climbing toward a peak around Memorial Day.
If the crisis brought on by the killing of Iranian Major-General Qassem Soleimani in a U.S. airstrike last week eases, and if there is no impact on oil supplies, then motorists here should see that pattern again, DeHaan said. “I think the market will be sensitive to any exchange of words,” he said, “but, if there is nothing else, I think it will go back to the status quo. Right now, it’s more of a wait and see.”
While the importance of oil from the Middle East has ebbed in the past decades, it remains a crucial energy source for the world market, with much of the oil shipped through the Strait of Hormuz.
Any disruptions there would affect the U.S., even though most of this country’s oil is now domestically produced.
Politically, Iran’s leadership is under pressure to respond to the killing of Soleimani, according to energy economist James Williams, president of Arkansas-based WTRG Economics. “The most obvious (response) is an attack on vessels in the Strait of Hormuz,” he said. “However, an overt attempt to close the strait would certainly be met by overwhelming force by the U.S. and its allies.”
Much of the oil on those vessels is from U.S. ally Saudi Arabia, which produces about 9.9 million barrels of crude each day – more than 10% of the world’s total, according to the Energy Information Administration.
Iran’s own oil shipments have been dramatically constrained by U.S.-led sanctions.
Still, the country’s leaders could retaliate in ways that don’t cut oil supplies, like a cyberattack, Williams said in an email. “From our point of view, this involves lower risk to Iran as it would be far less likely to result in a military conflict.”
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