MIAMI — The Iran conflict threatens to place upward pressure on more than just prices at the pump.
“It is going to affect everybody,” said Florida International University professor Edward Glab. “Oil prices are already climbing, and that is going to translate into higher prices at the gas pump, it is going to translate into more expensive jet fuel for transportation and diesel fuel, so it is going to ripple through the economy. It is going to put pressure on raising inflation.”
Glab went on to say that if the straits of Hormuz shut down, it means a loss of about 20% of the oil that is moved daily around the world.
Grocery store items on the store market shelf could also be impacted as diesel prices climb even higher than gas prices, increasing how much businesses need to pay to transport items.
That cost gets passed down to the consumer.
“Keeping in mind diesel fuel, shipping prices, that is factored in on every single item that you have on a store shelf as well,” said Gas Buddy petroleum analyst Matt McClain. “And diesel prices are climbing even higher than gasoline prices right now.”
This is all as the strikes by the U.S. and Israel on Iran spark regional unrest, disrupting global supply chains.
“Long term is really what we have to talk about,” said Glab. “How long is it going to go on, and if at some point are the Iranians going to try and completely block the strait of Hormuz, and then we will be in big trouble because 20% of the world’s oil is suddenly going to disappear from the market.”
Glab said it is not in Iran’s best interest to block the oil, since it is the way most of their oil gets out into the international market, which he said would impact China the most since they are heavily dependent on buying Iran’s sanctioned oil.
Maritime traffic shows cargo ships and oil tankers dropping anchor in and round the Strait of Hormuz off the cost of Iran as some container shipping companies divert vessels around Africa.
The situation remains volatile.
“That is why we are seeing the price point of crude oil unfortunately go up,” said McClain.
The length of the conflict could dictate how soon and how high those prices could rise.
“You have the additional cost of the transportation, you have the insurance risk, those costs are going up, so no matter how you slice this, it is going to have a negative impact on prices, and that means a negative impact on inflation and what people are going to paying when they go to the supermarket,” said Glab.
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