Gas prices could rise due to the conflict with Iran.
Brent crude opened Thursday at $67.83 a barrel, down more than $13 from the high of $81 last week, after traders decided the Iran-Israel ceasefire will probably keep the Strait of Hormuz open.
It follows US President Donald Trump delivering an all-caps message about oil prices on Monday, less than a day after US and Israeli forces struck three Iranian nuclear sites. “EVERYONE, KEEP OIL PRICES DOWN. I’M WATCHING!” Trump wrote on his social media platform Truth Social. “DRILL, BABY, DRILL!!! And I mean NOW!!!”
The attacks briefly sent Brent crude, the world’s benchmark oil price, above $81 a barrel. Traders drove that price back into the low $70s after Iran retaliated against the US by firing missiles at a US military base in Qatar, a relatively limited response.
What do oil prices mean for drivers?
Crude oil makes up a little more than half the cost of what drivers pay at the gas pump, and analysts say every $10 hike in oil prices usually nudges the average US gasoline price up by 20 to 25 cents a gallon. As of June 26, AAA puts the national average for regular gasoline at $3.22 a gallon with diesel fuel at $3.72.
A week ago, regular gasoline was $3.14 a gallon, so tensions have tacked on 8 cents. Californians are paying the most at $4.62, while drivers in Texas enjoy the lowest statewide average price at about $2.85. CNET will track the AAA daily averages and key market benchmarks as long as the Iran standoff threatens fuel costs.
Analysts do warn the Golden State could be a wild card. If two Bay Area refineries convert to renewable-fuel production next year, local supply could tighten enough to push prices “as high as $8 a gallon,” according to a recent report cited by Patch. But state officials say that figure is false, noting that the projection comes from an industry-funded analysis with no transparent modeling. Stanford economists call any refinery-related bump “negligible.”
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If Tehran for some reason follows through on threats to close the 21 mile-wide Strait of Hormuz, which carries roughly 20% of the world’s oil, Goldman Sachs warns that the price of Brent crude could leap past $110, a level likely to push the average US pump price over $4. Traders first bid oil up on fears that Iran would shut the Strait of Hormuz, the world’s busiest oil chokepoint.
Prices sank after Iran’s limited retaliation hit a US base in Qatar, sparing tankers and energy facilities, and they remained soft as the ceasefire holds. If a tanker is hit or the Strait of Hormuz is even partly blocked, experts say supplies could get tight almost instantly.
So far, the OPEC Plus oil alliance has not called an emergency meeting. Russian President Vladimir Putin says the group does not need to act, and Saudi Arabia’s energy minister says the country will wait to see what the market actually does. The administration could tap the Strategic Petroleum Reserve if Iran disrupts oil flows, but no steps have been taken so far.