‘An upward trajectory’: Petroleum expert on Iran conflict’s impact on gas prices

By Brett Davis
The Center Square

The ongoing U.S.-Israeli military offensive against Iran is causing drivers in Washington state – already paying some of the highest gas prices in the nation – to shell out even more of their hard-earned money for fuel. That’s not going to change any time soon, according to one expert.

Per AAA, as of Friday, the average price for a gallon of regular unleaded gas in Washington is $4.76. A month ago, the average price at the pump in Washington was just over $4.11.

Washington has the third-highest gas prices in the nation, behind only California and Hawaii. The current national average is $3.63. A month ago, it was $2.94.

Washington’s high fuel prices are the result of several factors. The state has one of the highest gas taxes in the U.S., with a state excise tax of 55.4 cents per gallon, which increases by 2% annually.

When combined with the state’s Climate Commitment Act – which adds an estimated 40 to 60 cents per gallon – and federal taxes, total taxes added to a gallon of gas can exceed $1.

Washington’s limited regional refinery capacity is another factor in the state’s high gas prices.

The conflict in the Middle East, which began on Feb. 28, has shut down – at least for the time being – the Strait of Hormuz, cutting off one-fifth of the world’s oil supply. Oil prices have soared more than 40% since hostilities began, precipitating the spike in gas prices.

“It is causing an upward trajectory in all 50 states in the United States, and not only every province in Canada but across the globe,” Matt McClain, a petroleum analyst with GasBuddy, explained in a Thursday phone interview.

GasBuddy is a technology platform and mobile application designed to help drivers find the cheapest local gas prices through crowdsourced data.

McClain predicted the situation would get worse before it gets better.

“But we are looking at extraordinarily unique circumstances,” he said. “The longer that the Strait of Hormuz remains closed, the more exasperation this is going to create when it comes to the global economy as a whole, including the United States.”

Don’t look for gas prices to come down soon, he warned, noting the energy market is global.

“We are also expecting prices for gas at the local gas stations across the country to begin and upward trajectory once again,” McClain said, “possibly as early as this weekend.”

High fuel prices increase costs for shipping, manufacturing and raw materials, leading to higher prices. Because most goods rely on gas or diesel for transport, elevated fuel costs immediately raise operating expenses for companies, which are passed on to consumers.

“Everything is going to be on an upward trajectory, because just last week alone in a seven-day period, we saw diesel fuel increase by a dollar a gallon,” McClain said. “That is an extraordinarily sharp increase in a very short amount of time. That will impact everything: groceries, farmers, you name it. Anything that uses diesel, it’s going to have a trickle-down effect on how that’s going to impact our food prices going forward.”

In Washington, the average price for a gallon of diesel fuel is nearly $5.80. A month ago, it was almost $4.79.

Washington is one of the most trade-dependent states in the U.S. Approximately 40% of all jobs in the state are tied to international trade. Agriculture is a central driver of the state’s trade-based economy, with more than 300 crop varieties and billions in annual exports.

McClain said consumers could start to see the price of food products that requires more frequent shipping due to a shorter shelf life – produce, never-frozen meat, dairy – inch up in the next week or two due to higher shipping costs.

“We are fully well supplied with oil here between Canada, the United States and Mexico,” he pointed out. “We export oil as a continent on a very large scale, especially the United States. Other places, however, aren’t so lucky. Asia, prime example. They rely heavily on Middle Eastern oil.”

Reopening the Strait of Hormuz is critical.

“I can say as a petroleum analyst, anything that could get the Strait of Hormuz open and running again would be very much appreciated, I know, by pretty much every person on the globe,” McClain said.

In the meantime, he offered some tips for drivers on how to stretch their gas dollar.

“Hear me out, even if I sound like a police officer with a badge,” McClain joked.

“The best thing that we can do is slow down,” he said. “Go the speed limit instead of speeding.”

That could save 25% to 35% in fuel efficiency, he added.

Proper tire inflation, clean air filters and regular oil changes also improve fuel efficiency, according to McClain.

“Unfortunately, until we have a viable solution for getting the Strait of Hormuz open,” he said, “this is where we are.”