Oil prices continue to soar with no end in sight

The United States is the world’s biggest exporter of oil and much of that oil comes straight from the Gulf Coast. So, why do gas prices continue to skyrocket here at home as the Strait of Hormuz remains closed?

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Greg Upton is Executive Director at LSU Center for Energy Studies and says it all comes down to oil ultimately being a global commodity. “Even though the United States is a net exporter of oil to the global market, when you have a disruption on 20% of that global commodity being shipped, that puts upward pressure on prices and impacts us here as well,” Upton explained.

Oil exits the Persian Gulf and enters into the global market through the chokepoint of the Strait of Hormuz. The countries exporting oil through that strait include some of the world’s biggest producers in Saudi Arabia, Iran, Kuwait and Quatar.

Upton emphasizes that there are no clean options when it comes to easing gas prices while remaining at war with Iran. “If you destroy their infrastructure, that’s going to impact the global price by taking those barrels off the global market. That’s maybe not what you want to do in this instance. You could also take over the island, but that carries military risk of having boots on the ground doing that,” he went on to note.

In the end, supply and demand dictates what you pay at the gas pump. “The global price of oil is determined by the global balance of supply and demand. Whenever there’s a global disruption, even if it’s across the world, that impacts the global price we sell the product onto the market for. That impacts the price consumers see for gasoline since it’s derived from oil,” Upton emphasizes.

With the war in Iran continuing to develop, there’s no real end in sight to oil prices settling down.20% of the world’s oil supply will need to continue being shipped through the Strait of Hormuz and that crucial point is still a great point of contention.