MATT OTT
5 min read
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WASHINGTON (AP) — Iran launched missiles at a U.S. military base in Qatar on Monday, threatening to stoke a wider conflict in the Middle East, a region that supplies the world with about a third of the oil used globally every year. That same day, benchmark U.S. crude tumbled more than 7%, one of the biggest single day sell-offs this year. The following day, the same thing happened, driving crude prices down by double digits this week.
The seemingly illogical tumble in energy prices highlighted a new global reality: the world is awash in oil.
Gasoline prices barely moved this week, but experts say motorists will likely see prices at the pump begin to fall, perhaps as early as this weekend.
With the situation in the Middle East still volatile, Iran could try to block the Strait of Hormuz off its coast, through which 20% of the world’s oil passes daily. While few expect Iran to do that because it would cripple the ability to move its own oil, the fact remains that there have been drastic changes in the 50 years since an Arab oil embargo hobbled the U.S. economy and sent energy prices skyrocketing.
Following is a quick rundown of the new forces on supply and demand that have reshaped the global energy landscape, and what you can expect to see as far as prices at the pump this weekend.
PRICES AT THE PUMP
Technical innovation in the last two decades has upended global energy markets and made the U.S. the world's top oil producer, surpassing even Saudi Arabia in 2018. It's contributed to an extended surplus of oil, and that has consistenly driven prices lower.
Gas prices have been in broad decline for roughly three years. That has remained true even during traditional periods of high demand, like the summer travel season just now kicking into high gear.
Part of the reason, according to Patrick De Haan, the head of petroleum analysis for GasBuddy, is that the U.S. announced aggressive tariffs against its trading partners at around the time of year that U.S. gas prices usually begin to rise. That suppressed demand, for both households and businesses, due to anticipation of economic fallout from a broader trade war.
And prices are likely to begin falling again, and fast. Gas stations bought their fuel supplies before crude prices slumped this week, so motorists have not seen gas prices decline due to a typical lag between oil and gasoline prices.
“I think that the national average will probably cease to increase in the next 24 to 48 hours,” Patrick De Haan, the head of petroleum analysis for GasBuddy said Tuesday. “Then it should stabilize for maybe a day or two and then we should start to see prices — at least the national average — to start falling this weekend.”
