Recent pump relief could be over as crude oil prices surge again

Renewed Middle East tensions pushed petroleum industry prices up Monday, reversing recent reductions by the anticipation of a peace deal and the reopening of the critical Strait of Hormuz shipping passage.

Brent crude futures were up more than 6% to trade around $97 a barrel Monday morning after Iran’s semi-official Tasnim news agency reported that the country was suspending negotiations with the U.S. over Israel military strikes in Lebanon, according to a Wall Street Journal report. U.S. crude moved up over 8% to $95 per barrel and wholesale gas prices jumped 4%.

Wholesale oil prices along with retail gas prices had been headed down over the past week as President Donald Trump and other officials signaled negotiators were on the cusp of sealing an Iran peace deal. But that market optimism came to a halt after the Iranian government-aligned media’s report that the country was cutting off talks with the United States to end the ongoing war.

Average gas prices across the U.S. dropped nearly 19 cents per gallon in the past week, according to tracking by AAA, though the current average price for a gallon of regular across the country, $4.32, is still $1.18 per gallon over this time last year.

Industry experts warn the spike in pricing of wholesale oil futures could soon be reflected in consumer prices at the pump.

“Average gasoline prices declined in all 50 states over the last week, with GasBuddy now tracking 15 states where the average price of gasoline has fallen below $4 per gallon, offering motorists some of the most widespread relief seen in weeks,” said Patrick De Haan, head of petroleum analysis at GasBuddy, in a Monday blog post. “Much of the decline was driven by falling oil prices and the unwinding of recent price cycles, as growing optimism surrounding a potential U.S.-Iran agreement helped ease concerns over global oil supplies. Diesel prices also posted a substantial decline, falling more than 15 cents per gallon nationally.

“However, the coast is anything but clear. Oil prices edged higher Sunday evening as uncertainty surrounding a potential deal persisted and renewed Israeli attacks added another layer of geopolitical risk. While motorists may continue to see some short-term relief, some price-cycling states could soon experience another upward swing as retailers run out of room to lower prices further. Overall, any setback in negotiations could quickly reverse the recent decline in fuel prices.”

Dangerously low oil supplies

Exxon senior vice president Neil Chapman warned at a conference hosted by Bernstein in New York last week oil inventory is approaching “unheard of” levels

“I mean really, really low levels,” Chapman said, per CNBC. “You can debate whether that’s going to hit, those really low levels, in two weeks or three weeks. Once you get to that point, then you’ll see price shoot up.”

Oil industry executives have sounded that alarm for months as the crude futures market has not reflected the scale of the Middle East war disruption.

“I don’t know, whether it’s two to three weeks or three to four weeks,” Chapman said. “What I’m really saying is, once you get to the minimum inventory levels and all-time low inventory levels, there’s only one way to go. That’s the situation.”

Consumers worn out with war’s impacts on family budgets

Utah drivers are facing fuel costs running well ahead of the rest of the nation with the average price of a gallon of regular at $4.54 on Monday, per AAA. That price is down from $4.64 a week ago but running $1.26 per gallon higher than this time last year.

Recent polling by the Deseret News in partnership with the University of Utah’s Hinckley Institute of Politics finds households in Utah and across the country united in their concern over how economic fallout from the Iran war is challenging their financial well-being and ratcheting up anxieties.

The survey revealed a striking level of worry among respondents in both the statewide and national samples, with 80% of Utahns and 79% of Americans saying that they’re at least somewhat concerned about the war’s impacts on the U.S. economy, with 51% and 50%, respectively, saying they are very concerned. Just 18% of Utah poll participants and 15% of national respondents said they were not too concerned or not at all concerned about the impacts.

Overall concern about how the war in Iran is affecting household budgets was similarly widespread, with 87% in Utah and 79% nationally saying the cost of daily goods has increased somewhat or a great deal. Only 3% and 7%, respectively, say they are paying prices that are somewhat or a great deal lower since the war began.