(UPDATE) THE price of oil surged higher and showed no signs of halting its rapid climb a week after the US and Israel launched major attacks on Iran that escalated into a war in the Middle East.
The conflict, in which nearly every country in the Middle East has sustained damage from missiles or drone strikes, has left ships that carry roughly 20 million barrels of oil a day stranded in the Persian Gulf, unable to safely pass through the Strait of Hormuz, the narrow mouth of the Gulf that is bordered on its north side by Iran.
The shipping disruption and damage to key Middle East oil and gas facilities have interrupted supplies from some of the world’s largest oil producers.
Kuwait, for example, said on Saturday that it would reduce its oil production as a “precautionary” measure due to the war, which could jolt global energy markets even further.
Oil prices surpassed $90 a barrel Friday, with American crude settling at $90.90, up 36 percent from a week ago, and Brent, the international standard, climbing 27 percent over the course of the week to land at $92.69.
The fallout is ratcheting up what consumers and businesses will pay for gasoline, diesel and jet fuel, with some drivers already feeling it at the pump.
“It’s crazy. It’s not needed, especially at a time when people are already struggling, but not unexpected from all this turmoil that’s going on,” said Mark Doran, who was pumping gas in Middlebury, Vermont, on Friday. “I don’t think there’s been an end in sight to any Middle East conflict that’s been started by us, so the fact that they say that there’s going to be an end that quickly is not believable, and the Middle East is, you know, a place that the US is not going to solve.”
President Donald Trump said Monday that the US expected its military operations against Iran to last four to five weeks but has “the capability to go far longer.”
On Friday, Trump appeared to rule out talks with Iran absent its “unconditional surrender.”
“The more news we get, the more it seems like this is going to last a really long time,” said Al Salazar, head of macro oil and gas research at Enverus.
In the US, a gallon of regular gasoline rose to $3.41 on Saturday, up about 43 cents from a week ago, according to AAA motor club. Diesel was selling for $4.51 a gallon Saturday, up about 75 cents from last week.
The price shocks were felt even more heavily in Europe and Asia, markets that rely more heavily on energy supplies from the Middle East.
Diesel prices doubled in Europe, and jet fuel prices rose by close to 200 percent in Asia, according to Claudio Galimberti, chief economist at Rystad Energy.
Energy prices climbed throughout the week as Iran launched a series of retaliatory attacks, including a drone strike on the US Embassy in Saudi Arabia, and the conflict widened.
Iran also hit a major refinery in Saudi Arabia and a liquefied natural gas (LNG) facility in Qatar, halting flows of refined products and taking about 20 percent of the world’s LNG supply offline.
“We keep seeing news of vessels being hit or refineries or pipelines, so the list is very long,” Galimberti said.
As a result, roughly 9 million barrels of oil per day are off the market because of facilities being hit or producers taking precautionary measures, he said. “Right now, with all of this shut-in, we are in a situation of extreme deficit.”
Trump issued a plan Friday to insure losses up to approximately $20 billion in the Gulf region, aiming to restore confidence in maritime trade, help stabilize international commerce, and support American and allied businesses operating in the Middle East.
But some energy experts said extra insurance won’t solve the problem.
“The problem is that in the oil trading, oil shipping world, people are worried about counterterrorism,” said Amy Jaffe, director of the Energy, Climate Justice and Sustainability Lab at New York University, adding that they’re worried about automated drone speedboats, weapon-carrying flying drones and mines or other devices. “In order for the United States to create the atmosphere that undoes the current bottleneck at the Strait of Hormuz, there has to be some credible demonstration of solutions to the counter-terrorism problem.”
Salazar wondered what the “new normal” would look like if the Strait of Hormuz were effectively re-opened, and what effective security would look like.
“All it takes is one individual with an RPG (rocket-propelled grenade) to stand on the shore and take out a tanker, right?” Salazar said. “And this is forever, do you know what I mean?”
The Philippines is also feeling the aftershocks of the conflict in the Middle East, with increases in pump prices this week expected to be massive.
There were reports last week that the per-liter price of kerosene may go up by P24.92, diesel by P19.62, and gasoline by P10.43.
Final price movements are scheduled to be announced today, March 9.
Some gas stations were reported to have already jacked up their prices.
Sen. Panfilo Lacson urged the public to report gas stations that “prematurely” increase prices.
Lacson said prematurely increasing fuel prices violates Republic Act 8479, or the Downstream Oil Industry Deregulation Act of 1998 and RA 7394, or the Consumer Act of the Philippines.
He said the public can report violations to the Philippine National Police (PNP) and concerned local government units (LGUs).
“Amid reports that some gasoline stations have already increased prices, they must be reported to authorities,” Lacson wrote on X on Saturday.
Another senator, Win Gatchalian, urged the Department of Energy (DOE) to monitor retailers and oil companies for possible profiteering amid what he described as an “energy crisis” stemming from the escalating conflict in the Middle East.
DOE Director Rino Abad said the government has no control over the pricing of petroleum products due to the oil deregulation law.
“The increase in the oil prices in the world market has just been announced. But some retailers have already raised their prices. This is profiteering,” Gatchalian said.
“They cannot increase prices immediately because they had bought their current stocks at a lower price. They should sell at a reasonable price,” said Gatchalian, vice chairman of the Senate Committee on Energy.
Oil companies have an inventory of about 50 days, “so they should not jack up pump prices that quickly,” he said.
From January to March 4, gasoline pump prices increased by 13.7 percent, from P55 to P62 per liter. Diesel prices rose by 41.4 percent, from P54 to P76 per liter, while kerosene prices went up by 43 percent, from P79 to P114 per liter.
Lacson said Energy Secretary Sharon Garin had instructed the PNP and local governments to monitor and report violations “so [that] appropriate criminal and administrative proceedings may be initiated against erring gas station operators.”
