Gas prices will rise due to Iran conflict, but are likely temporary

How tensions with Iran could impact Minnesota gas prices

The price of crude oil will jump on expectations that the Iran conflict will continue for at least a few weeks. Tanker traffic is mostly halted through Strait of Hormuz, which carries 20% of world’s crude oil supplies. Across the U.S., predictions are that gas prices will rise between 10 to 30 cents a gallon, but likely temporarily, and still lower than one year ago.

MINNEAPOLIS (FOX 9) - If you haven’t seen a rise in prices at the gas pump just yet, it’s likely you will in the coming days and weeks.

The military strikes in Iran pushed crude oil prices higher right away on Monday. And word from U.S. leaders that those actions would continue for at least a few weeks only added to the price uncertainty.

Tanker traffic stalled

What we know:

About 20% of the world’s oil supplies pass through the Strait of Hormuz, off the coast of Iran.

That tanker traffic has largely come to a halt, and it’s unclear for how long.

Much of that oil goes to China, but the ripple effects of such a large impact on supply immediately pushed up the market prices of crude oil. That includes in the United States, which is the world’s largest producer of oil and natural gas, because these commodities are traded globally.

Global ripple effects

What's next:

The oil and gas tracking website GasBuddy.com predicts a jump of anywhere from 10 to 30 cents per gallon over the next several weeks.

"Ultimately, this is not necessarily a massive spike in prices," said analyst Patrick De Haan in a video posted to their site. "It will be a noticeable jump at the pump, but it likely will be temporary as well."

He also predicted that getting the tankers moving again will be a high priority because of the shocks to the oil markets.

"I would look for the United States and (other) oil producing countries to secure the strait of Hormuz," De Haan said, "or to pay attention so that ships can start transiting again."

The uncertainty factor

Why you should care:

Another factor is prices is uncertainty, which also leads to higher prices simply for insurance against the unpredictable.

"Who knows whether the war is going to spread, whether it’s going to affect refineries, whether it’s going to affect refining capacity," explained Professor Akshay Rao of the University of Minnnesota’s Carlson School. "So the resulting uncertainty is something that a firm will hedge against."

But Rao also said there is one other major factor: When consumers expect prices to rise, retailers know they can get away with it.

"Perception is reality, right? If consumers perceive their prices are going to go up, their prices will go up.  It’s a self-fulfilling prophecy," Rao said.