Will fresh Iran tensions send California gas past $7 during peak travel season?
By Vince Basada
Concerns over the future of the Strait of Hormuz and escalating tensions between the U.S. and Iran have once again pushed up oil prices across the country and in California.
The shaky ceasefire between the U.S. and Iran collapsed last week, with both sides trading attacks and strikes through the weekend. President Donald Trump said Monday that he hopes the U.S. would run the strait, a vital passage for petroleum products which Iran claims control over, as its “guardian.” The U.S. also reinstated its naval blockade against Iran.
The global oil benchmark Brent Crude index rose sharply, reaching $84.50 per barrel by Tuesday — an approximate 12% increase over three days. Barrel prices came down slightly Wednesday, but remained high.
Gas averaged $5.35 a gallon in Sacramento on Wednesday, compared to the state average of $5.39 a gallon, according to AAA. In the past week, the national average price of gasoline rose 10 cents to $3.89 a gallon.
“The national average price of gasoline has seen its first weekly increase since May 11, snapping a streak of eight straight weekly declines, with prices climbing in nearly four out of five states,” said Patrick De Haan, head of petroleum analysis at price-tracker GasBuddy, in a July 13 press release. “The turnaround comes as oil prices have surged following the collapse of the ceasefire between the U.S. and Iran and the start of new attacks, with oil jumping another 4% in Sunday evening trading, an ominous sign that could bring additional gas and diesel price increases in the week ahead,” De Haan said.
California gas prices since the conflict began peaked at just over $6 a gallon in May. They had been coming down since the ceasefire was first announced in June.
“Californians are already paying some of the highest gas prices in the nation,” said Jim Stanley, media director at the Western States Petroleum Association, a non-profit trade group. “When you have that high baseline, anything that sends prices higher Californians feel much more acutely than anyone else in the rest of the country.”
Whether California could see prices at the pump reach or exceed the $7 per gallon cost is a toss-up. A CalMatters article from May reported one expert as saying that once prices exceed $5.50 a gallon, consumer demand will drop. While another expert said a $7 per gallon cost is possible.
While some effects of the Strait of Hormuz’s latest closure are felt immediately, it will take a few weeks for the full effect to be realized. The closure and blockade join other global events pushing fuel prices upward, including a disruption of Russian oil refinement due to an expansion of Ukrainian drone strikes.
“The Strait of Hormuz is generally impacting crude prices, and those play a significant role in the retail cost of gasoline, but that’s not the only factor.” said Stanley. “Crude and gasoline are two different commodities. Even if you have an increase in the supply of crude and the price of that goes down, if there’s not the capacity on the global level to refine it into gasoline, diesel, and jet fuel, then you can see a shortage on that side of refined products.”
