It’s one of the first questions we ask about the economy: Are gas prices going up? According to analysts from JPMorgan, it looks like they could jump this winter — a result of the Trump administration’s new sanctions on Iran.
When Trump announced his controversial plan to withdraw from the Iran nuclear deal, it came with a package of sanctions on crude oil exports, which will go into effect on Nov. 4.
JPMorgan analysts are sounding the alarm over Trump’s overconfidence in his new sanctions and investors’ complacency about them — there is a risk Trump will make “a major miscalculation” as he picks trade wars with China and global auto and oil markets, the bank says.
Are gas prices going up?
It looks like they could in November, just in time to hit holiday travelers and households that use home heating oil.
JPMorgan analysts say they expect the price of a barrel of oil to rise from its previously forecasted $60 range to $85 a barrel in the next six months, and a “spike” to $90 is likely.
“The main driver of this revision is a higher estimate of how much Iranian crude exports might decline due to multi-country respect for US sanctions that should come into effect on November 4th,” said JPMorgan.
Crude oil comprises 71 percent of gasoline, so the increase in the price of a barrel has a direct impact on prices at the gas pump.
What’s the history of oil and gas prices?
In 2008, the price of a barrel of oil hit a record level: $143. That sent gas prices soaring to $4.16 a gallon. Before 2008, oil prices had always stayed beneath $90 a barrel.
The price of oil has ebbed and flowed since but hasn’t returned to its 2008 peak. The closest it came was in 2012, when Iran threatened to close the Strait of Hormuz, which supplies 20 percent of the world’s oil. That sent oil prices into the $120 range and gas prices to about $3.90 a gallon.
After that, oil prices steadily declined, dropping as low as $27 in 2016. But they’ve been rising again since Trump took office, hitting $78 in mid-September. Gas prices are hovering around $2.90 a gallon this week. The last time oil was $90 a barrel, gas was $3.40 per gallon.
