Hormuz crisis drives oil surge, fuel prices rise worldwide
The price of oil is surging without halt, as the war in West Asia is escalating. Nearly 20 million barrels of oil a day are stranded in the Persian Gulf, unable to safely pass through the Strait of Hormuz, the narrow mouth of the Gulf that is bordered on its north side by Iran. The disruption and damage to key oil and gas facilities in the Middle East have led to an interruption in the supply of oil and gas.
Oil prices surpassed $90 a barrel Friday, with American crude settling at $90.90, up 36% from a week ago, and Brent, the international standard, climbing 27% over the course of the week to land at $92.69.
The fallout is ratcheting up what consumers and businesses will pay for gasoline, diesel, and jet fuel, with some drivers already feeling it at the pump.
In the US, a gallon of regular gasoline rose to $3.32 on Friday, up 11% from a week ago, according to the AAA motor club. Diesel was selling for $4.33 a gallon Friday, up 15% from a week ago. The price shocks were felt even more heavily in Europe and Asia, markets that rely more heavily on energy supplies from the Middle East. Diesel prices doubled in Europe, and jet fuel prices rose by close to 200% in Asia, according to Claudio Galimberti, chief economist at Rystad Energy.
Energy prices climbed throughout the week as Iran launched a series of retaliatory attacks, including a drone strike on the US Embassy in Saudi Arabia, and the conflict widened. Iran also hit a major refinery in Saudi Arabia and a liquefied natural gas (LNG) facility in Qatar, halting flows of refined products and taking about 20% of the world’s LNG supply offline.
Trump issued a plan Friday to ensure losses up to approximately $20 billion in the Gulf region, aiming to restore confidence in maritime trade, help stabilize international commerce, and support American and allied businesses operating in the Middle East. But some energy experts said extra insurance won’t solve the problem.
“The problem is that in the oil trading, oil shipping world, people are worried about counterterrorism,” said Amy Jaffe, director of the Energy, Climate Justice and Sustainability Lab at New York University, adding that they’re worried about automated drone speedboats, weapon-carrying, flying drones, and mines or other devices. “In order for the United States to create the atmosphere that undoes the current bottleneck at the Strait of Hormuz, there has to be some credible demonstration of solutions to the counter-terrorism problem.”
[with inputs from Associated Press]
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