Oil Prices Driven Up Worldwide

Oil prices have increased more than 40 percent since the start of the U.S.-Iran war on Feb. 28. This price increase is being passed on to drivers across the country at their local gas pumps.

The average U.S. gas price on March 25 was a little over $3.98 per gallon, up from approximately $2.98 one month earlier, according to AAA. The increasing oil prices have also driven up the cost of jet fuel and is likely to increase the price of products, such as food, as well.

So how does a war that feels very far away affect prices for everyone around the world? You’ve likely never heard of the Strait of Hormuz, but it is something that affects peoples’ lives every single day because it is a CRITICAL shipping route. It is a waterway that runs between Iran, the United Arab Emirates and Oman. At its most narrow point, the strait is only 24 miles wide. It is also the only sea passage out of the Persian Gulf into the Indian Ocean.

About 20 percent, or one-fifth, of the world’s oil and liquified natural gas pass through the Strait of Hormuz every year. Many countries rely on the oil that passes through the strait. China, the second most populated country in the world, is the biggest consumer of Iranian oil.

After the U.S. and Israel launched a joint attack on Iran in February, Iran launched drone attacks and missile threats that basically closed the Strait of Hormuz to most traffic. There have been at least 16 reports of attacks on ships in the Persian Gulf and near the Strait of Hormuz since the end of February. Because traffic in the strait is essentially at a standstill, oil supply has been disrupted, and prices are being affected.

The United States is the world’s largest oil producer. This means that our economy is less dependent on oil from other countries. However, that unfortunately does not mean that we are unaffected by the shipping freeze as the oil market is connected all around the world.