Why Washington gas prices could surge even more
Washington state currently has among the highest gas prices in the nation as the summer travel season kicks into high gear — the steepest prices in four years. But insecure oil markets could start to make things a lot worse.
The issue of oil prices recently found its way onto President Donald Trump’s Twitter feed. The president is demanding that OPEC bring oil prices down. One problem with global oil prices, however, has come from the president himself. Sanctions on Iran are pending, meaning that country’s oil could come off the market.
“A good part of it comes from increased security concerns in the Middle East, and the fact that the United States walked out of the JCPOA – the nuclear agreement with Iran – has definitely raised security concerns,” Richard Nephew told KIRO Radio’s Dave Ross. “But also, the fact that US sanctions against Iranian oil exports are coming back online.”
Nephew was once the principal deputy coordinator for sanctions policy at the Department of State. He was the lead sanctions expert for the US team negotiating with Iran in 2013-14. That experience is documented in his book, “The Art of Sanctions.”
“I tend to think we ought to look ahead of the road before we start pressing down on the accelerator, and I certainly think the president is now starting to be told that if we take Iranian oil exports down to zero, this is only the start of oil prices going up.” Nephew said, noting that Saudi Arabia and other countries could start pumping more oil to bring prices down, but it’s not that easy.
“They can, but there is a real question about if they can pump enough,” Nephew said. “Back in the heyday of Iran sanctions, we still had the Iranians exporting (around 2.4 million barrels per day) of oil. But the state department just said we should get them down to zero. Well, there isn’t 2.4 million barrels a day of spare capacity anywhere in the world … from that perspective, if we are truly intending on driving Iran to zero, that is going to have an increased pressure on prices. It just has to. It’s the law of supply and demand.”
Washington gas prices
The average gas price in Washington was $3.46 on Friday. The last time gas prices were as high as they are at this time of year — more than $3 per gallon — was in 2014. According to GasBuddy, prices in Seattle range between $3.59 and $3.75 per gallon. In fact, much of Washington and parts of Alaska currently have around the second highest gas prices in the nation, after California.
The cheapest gas in the state, if you pay cash, is at the Meridian Liquor store in Bellingham. It was $2.98 as of Friday.
The state has five oil refineries and boasts the fifth highest refining capacity in the country. Most of the oil in the Northwest comes from Canadian and Alaskan sources. But that hasn’t stopped gas prices from going up as the summer travel season kicks in (when they are expected to rise by 14 percent). In fact, July Fourth gas prices were the highest since 2014.
Democrats, including Senator Maria Cantwell, have blamed the spikes on President Trump. Cantwell has argued that Trump’s Middle East policies, specifically with Iran, have caused insecurity in the market and spurred prices to climb. She noted in May that prices have shot up by 75 percent in the past year.
The West Coast is experiencing the highest gas prices in the country, largely because the region is cut off from much of the rest of America’s oil supply lines. That means when oil supply is threatened — perhaps because global oil markets become insecure — it can hit the West Coast the hardest (especially since California is the world’s third largest consumer of petroleum).
The prices are spiking as one initiative effort aims to place a fee on carbon polluters in Washington. I-1631 would implement a carbon fee in the state to raise money for clean energy. Oil companies are likely to combat the initiative by saying it will cause Washington gas prices to rise.
Nephew said that oil prices were up to $120 per barrel between 2010 and 2013. He assumes they can go just as high under emerging global conditions. Barrels are currently around $73, after going for about $50 not long too ago.
America may have “made it look easy” under previous Iranian sanctions, Nephew points out, but that isn’t the case anymore.
“The world has changed a lot in those six or seven years,” Nephew said.
Nephew said that the president tweeting at OPEC was likely meant to send a message. Saudi Arabia has an interest in keeping Iran under control. So America could, in theory, work with that by putting pressure on Iran, if the Saudis use their influence to bring oil prices down.
“Will it help oil prices go down? I strongly doubt it,” Nephew said. “There is a very real concern that it is a market issue, as opposed to a speculation issue on the part of the Saudis.”