How Trump Ending the Iran Deal Will Impact Gas Prices

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We all know how fickle gas prices are. I used to joke every time they rose that someone must’ve hiccupped in the Middle East.

When Trump decided this past Tuesday that it was time to end the Iran nuclear deal, we as Americans either supported or opposed it based upon our knowledge of the situation and political affiliations, but we didn’t think about the other ramifications this might play out – and one that could severely hit our pocketbooks.

Now, the important thing to know is this: this U.S. gets no direct gas import from Iran, but many of our allies do. These are the same allies who have blasted Trump in the past several days for his decision to cut the nuclear deal, probably more out of personal interest.

One country who holds a lot of cards in this situation is China. 1/3 of all of Iran’s gas output is guzzled by China, and where China falls in this whole situation will play a major role in future fuel prices.

In fact, if you haven’t noticed yet, the prices have already surged up merely on rumor of Trump’s well-guessed decision to cut ties with Iran. While it doesn’t directly tie in with where America gets its fuel, any drop in the global supply will ultimately ratchet up the prices.

With China being Iran’s number one customer, this doesn’t bode well for the relationship of the two countries who are already deadlocked in an impending trade war. The situation will become grave indeed if the Trump administration decides to impose sanctions on countries who continue to help Iran.

Our European allies, who also seem quite frustrated with Trump’s decision, also seem less likely to play along. But even if they do, undoubtedly to keep Trump happy, sanctions on Iran won’t be as impactful if the U.S. can’t get China on board.

The last time Iran was under sanctions before the nuclear deal was created by the Obama administration, Iran just churned out more oil to beat any economic hit they might’ve taken.

China went from buying 420,000 barrels per day to around 481,000 barrels. Just before the nuke deal was about to expire, they dramatically increased their imports to around 700,000 barrels per day earlier this year in expectation of the deal to fall through.

Recently, OPEC and Russia made a deal to cut oil supply, along with Venezuela and Saudi Arabia. The uptick in the U.S. economy means the demand for oil is back on, and now increased volatility in the Middle East may just create the perfect storm for another hot summer with higher gas prices.

Bank of America, along with other experts, are already predicting a return to $100 barrels of oil this summer, which will do nothing but put increased pressure on nearly every industry that is still recovering from the decade-long recession.

Last modified: May 14, 2018