Will gas prices go down due to US-Iran ceasefire? What to expect
Gas prices in the United States, above $4 per gallon, could continue to rise after Iran reportedly closed the Strait of Hormuz, a day after President Donald Trump announced a two-week ceasefire.
Iran closed the vital trade route in response to heavy Israeli bombardments on Lebanon, Iran’s semi-official Fars News Agency reported. However, White House Press Secretary Karoline Leavitt said those claims were untrue and the route had been reopened.
A key component of the ceasefire is for the strait to remain open while negotiations take place over the next two weeks. If the strait is now closed, as Iranian media reported, it's unclear what will happen now.
About 20% of the world’s oil passes through the strait, which was effectively shut down for weeks after the United States and Israel attacked Iran on Feb. 28.
Its closure sparked “the largest supply disruption in the history of the global oil market,” according to the International Energy Agency.
But gas prices could keep going up even if the strait remains open. That’s because supply chains need time to rebound after oil supplies are reduced. Delayed shipments have to be cleared, and inventories must be rebuilt.
There’s also the potential for future oil supply disruptions, the IEA says.
Relief at the pump may be delayed
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The two-week ceasefire announced on April 7 allowed shipping to resume through the strait. Iran, which Reuters reported wants to charge ships a toll for passage, has said its military may coordinate transits.
Still, shipping companies may be hesitant to send vessels through the strait even if it reopens, according to the BBC, which reported that transit details have not yet been provided.
About 130 ships transited the strait per day in February, according to the United Nations Trade and Development. The BBC reported three tankers used it on April 8.
More than 3,000 ships use the strait every month. Most of them transport crude oil, refined petroleum – the equivalent of about 20 million barrels of oil a day – and liquid natural gas from Persian Gulf docks to ports in China, India, Japan and South Korea.
A portion of oil shipments goes to Europe, and about 4% of crude oil exports head to the Americas.
Ship tracker MarineTraffic showed hundreds of tankers in the Persian Gulf waiting for exit, according to the Wall Street Journal:
Hundreds of other container ships and cargo ships are also in the Persian Gulf, the Journal reported.
The strait is one of three major waterways that allow shipping/passage of natural gas and petroleum exports from the Persian Gulf to Europe and North America. Others are the Bab el-Mandeb and the Suez Canal. Iran's southern border extends along the length of the Gulf.
Ship delays in the Strait of Hormuz will cause prices to rise
Dozens of oil refineries and other energy infrastructure in Iran and other nations in the Middle East have been damaged by aerial strikes in the war, according to the Insurance Journal.
Drone strikes and other attacks have hampered operations at energy ports in Saudi Arabia, the United Arab Emirates, Oman and other nations, the Journal said.
Contributing: Rachel Barber, Zac Anderson, Cybele Mayes-Osterman, Christopher Cann, Michael Loria
SOURCE USA TODAY Network reporting and research; Reuters; U.S. Energy Information Administration; International Energy Agency