The average price for a gallon of gas on Monday has pushed back up above $4 a gallon, according to AAA, as fighting between the U.S. and Iran intensifies again. The last time gas climbed above $4 was at the end of March, about a month into the war.
At the heart of oil prices right now sit two questions, according to Severin Borenstein, professor of economic analysis and policy at UC Berkeley’s Energy Institute at Haas.
“How much political stomach Trump has for higher gas prices, and how much the Iranians can live with in terms of disruption to their economy,” Borenstein said.
Oil hit $90 a barrel on Monday morning, which so far reflects the idea that markets think President Donald Trump and the Iranians want to negotiate. Because otherwise, Borenstein said, prices would be worse.
“Early on in the war, there were predictions of $150 or $200 per barrel,” he said “But that never happened.”
Oil prices peaked at about $110, because 30-some countries released strategic reserves. And China has quickly learned to live using less fuel, according to Catherine Wolfram, an economics professor at MIT.
“Basically insulated us from much higher run up in oil prices by the reduction in mainly gasoline consumption there from the diffusion of electric vehicles,” Wolfram said. |