Tyler Schipper, associate professor of economics at the University of St. Thomas College of Arts and Sciences, spoke with KARE 11 about how the conflict involving Iran is affecting global energy markets and fuel prices. Schipper explained that uncertainty around shipping through the Strait of Hormuz, a key oil transit route, has pushed crude prices higher as companies and insurers grow more risk averse. He noted that while the United States’ position as a leading oil producer may cushion some immediate impacts, a prolonged disruption could place upward pressure on fuel prices and supply chains.
From the story:
Kent Erdahl: “Iran has threatened to open fire on any ship that passes through the strait, but whether or not it’s actually closed down, does it really matter at this point?”
Schipper: “No, because you still have companies that are going to be risk averse.”
Schipper points to insurance companies, which began canceling war risk coverage for ships in the gulf on Monday, sending the price of crude oil higher and putting more pressure on China and other countries in Asia, which receive the bulk of the oil passing through the strait.
“The U.S. is now the biggest producer of oil and that provides us some cushion against these Middle East uncertainty shocks,” Schipper said. “If this ended tomorrow, this would be a small blip for the United States, but the longer it goes on, the more likely it’s going to put restraints on supply chains and we could see it put some more upward pressure on prices, overall, in the U.S.”
Some of that anxiety already appears to be priced in at the pump. According to Gas Buddy, the national average for regular gas surpassed $3 a gallon on Monday afternoon and kept climbing into the evening. The average in Minnesota surpassed $2.93 by 6 p.m., marking an increase of 21 cents in the past week, and a jump of 13 cents in just a day.
