Hostage crisis is already driving crude prices, senior oil analyst says
"Three-plus is the implication there," Stacy Nieuwoudt, an analyst with Pickering Energy Partners in Houston, said Friday of possible fallout from escalating tensions over Iran's seizure of 15 British sailors and marines.
Prices at that level could appear in Texas and across the country, she said.
Average gasoline prices in Houston jumped 8 cents for the week to $2.49 on Thursday, according to the weekly AAA Texas gasoline price survey. By Friday, a full week after the Iran-Britain standoff erupted, the average price had risen 2 more cents to $2.51.
In Texas, the average weekly increase was 6 cents to $2.49 a gallon as of Thursday, while nationally, gasoline prices rose an average of a nickel to $2.64 a gallon.
On Friday, California had the highest average price in the nation — the only state to exceed $3 a gallon — at $3.23.
Crude and gasoline prices ramped up throughout the week after Iran detained British naval personnel and fears rose about possible disruption of oil shipments from the Persian Gulf.
"We have seen a good run in the price of oil here in the last week — clearly it looks largely driven by the geopolitics issue in Iran," said Evan Smith, co-manager of U.S. Global Investors' global resources fund in San Antonio.
Crude prices closed Friday at $65.87 a barrel on the New York Mercantile Exchange, down 16 cents from Thursday's six-month high of $66.03. The Friday number was up $9 since the March 20 close of $56.73.
Iran, the second-largest member of the Organization of the Petroleum Exporting Countries, is the world's fourth-largest oil producer. According to the U.S. Energy Information Administration, about 17 million barrels of oil are shipped through the Strait of Hormuz alongside Iran each day, en route to the United States, Japan and Europe.
Various factors
Gasoline prices typically rise this time of year because gasoline inventories are tapped as refineries shut down for routine maintenance, known as "turnaround," in preparation for the summer driving season, he said.
According to the U.S. Department of Energy, gasoline inventories fell by 5.4 million barrels last week to 216 million barrels. Though comparable with year-ago inventory levels, gasoline demand is up 1.3 percent, the agency said this week.
Another factor is that companies are working to achieve the right gasoline blends to adhere to lower sulfur standards imposed for gasoline and diesel in the last year, Smith said.
Adding geopolitical tensions to the mix "adds a little pressure," Smith said.
Tensions come and go
Rayola Dougher, a senior economic analyst with the American Petroleum Institute, the oil and gas industry's trade group, estimated the Iran-Britain situation accounted for a "$5 fear premium."
"Those hostages could be returned any day now, and that would take pressure off the crude market price," she said.
"Turnaround season is advancing along, imports production is increasing and things are looking good heading into the season," she said. "We'll have to see how the geopolitics play out."
