Tensions between U.S. and Iran could impact gas prices, La. oil industry

Tensions with Iran could impact La. oil and gas industry

NEW ORLEANS, La. (WVUE) - Louisiana’s oil and gas industry is paying close attention to the escalating tensions between the U.S. and Iran even though America has become more energy independent.

Professor Eric Smith of Tulane University’s Energy Institute said when it comes to oil, it is a world-market.

"There’s nothing that happens anywhere in the world that doesn’t affect the price of crude oil and gasoline in the United States,” Smith said.

Smith said paying more at the pump could be a consequence of the standoff between the U.S. and Iran, especially if tensions are protracted.

"I think you should reasonably expect that. The thing I would caution people against is don’t overact to a short-term effect,” Smith said.

Tyler Gray, president of the Louisiana Mid-Continent Oil and Gas Association, said some oil prices have already been impacted in recent days.

"You do have these world tension issues that go on and you have seen a spike. Last week, West Texas Intermediate went up about 10 percent, ending around $57 a barrel. And as part of that, you are looking at a world market when it comes to those issues,” Gray said.

President Donald Trump increased sanctions on Iran this week, prompting growing concerns that in an effort to aggravate the U.S., Iran could try to choke off the critical Strait of Hurmoz, which provides sea passage from the Persian Gulf to the open ocean.

Smith said in addition to oil, liquefied natural gas passes through that area.

“Kuwait, which is one of the main producers of LNG in the world," Smith said. “Every single ship has to come through the Strait of Hormuz, it’s about 30 percent of the world’s trade in LNG [that] comes through those straits every day.”

And, liquefied natural gas is a growing part of Louisiana’s economy. However, as Louisiana refineries count on heavy crude from other places, Gray said they would not be paralyzed if things heated up significantly in the Persian Gulf.

“You’d never be in a situation where a refinery would reduce rates to the point where it would almost be shut down, so there are business models as such that they would keep going,," Gray said. “So even as there are escalating tensions in the Persian Gulf area, and with Iran and things like that, south Louisiana is resilient and will make sure that we’re able to keep producing product and meet customers’ needs.”

While the U.S. is producing more of its own oil, according to the federal government in 2018, the U.S. imported nearly 10 million barrels a day of petroleum from other countries.

Smith said transportation limitations are fueling a lot of the need for imported petroleum.

"So, for example, that includes refined products. We import a lot of gasoline into New York, right? New York Harbor and Philadelphia and all those places. It's not because we can't make the gasoline, it's because the refineries up there aren't linked with enough pipeline capacity to the Gulf Coast, so we can't get it from here to there,” he said.

And while consumers may not like higher gasoline prices, Smith said some other people may welcome the fallout from the rift between the U.S. and Iran.

"Right now, the world is slightly oversupplied with crude [oil], so some people might even welcome some sort of disruption, because it will allow oil prices to increase and gasoline prices to increase,” he said.

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