Fox Business – Gas prices Opens a New Window. that have already risen for seven weeks in a row, with the national average now near $2.70 per gallon according to AAA, are poised to go even higher in the next few weeks. While refinery mishaps, the switch to summer blends, and rising demand are part of the story, the real reason may have to do with Iran, the fourth-largest producer in OPEC Opens a New Window. .
The Trump administration Opens a New Window. is coming under increasing pressure to ratchet up sanctions on Iran and make good on President Trump’s promise to get Iranian oil exports down to zero. The U.S. has until May 2 to decide whether to issue new waivers to China, India, Japan, Turkey, Italy, Greece, South Korea and Taiwan, which were allowed in November to keep buying Iranian oil without facing penalties. This deadline will fall on the one-year anniversary of the U.S. pulling out of the Iran nuclear agreement, as the Trump administration said the deal was “defective at its core.”
The U.S. granted the waivers to these eight governments (Iran’s biggest oil buyers) at the last minute to avoid a price spike. Not only did it avoid a price spike, it caused a price crash. In fact, it was such a large price crash, it caused a loss of confidence in the stock market and hit OPEC and U.S. oil companies.
Many U.S. oil companies had raised production to accommodate for the loss of Iranian oil. Then when the U.S. granted waivers, these companies were left holding the barrel. The ensuing crash in the oil price not only hurt oil companies directly but brought the entire stock market along with it. Since the price of oil is viewed as a barometer of economic growth, the waiver-based selloff raised larger concerns about the global economy.
Trump shouldn’t want to repeat that mistake and more than likely will not extend the waivers. Yes, that will make prices go up, but at the same time the buyers of Iranian crude have had one year to prepare.
Still, many in the market believe that Trump will extend waivers. But if he doesn’t, get ready for a price pop. I’d make sure your gas tank is full on May 1, ahead of the announcement.
Phil Flynn is senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world’s leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report.