Many have raised concerns after the administration’s recent decision to impose sanctions on countries that buy Iranian oil. The sanctions have had the greatest impact on China, India, Japan, South Korea, and Turkey, and oil prices have reached their highest levels since October.
Crude oil is still the king of renewable energy, at least for now. According to Visual Capitalist, “In 2018, we consumed more oil than any prior year in history – about 99.3 million barrels per day on a global basis. This number is projected to rise again in 2019 to 100.8 million barrels per day.” So which countries have the largest oil reserves? See the image below.
So, what does this mean for the US and Businesses? We have already seen an increase in gasoline prices, and the sanctions could potentially raise prices even further. If there is a mismatch in the number and crude grade of barrels demanded, versus what’s available, there could be another spike. In this article from US News, Ryan Fitzmaurice, an energy strategist at Rabobank stated, “We’ve seen that market tighten up considerably even before the Iranian news, and we’re also seeing a number of refining issues in the US.”
However, some aren’t as concerned. According to Business Daily, “The US has downplayed risk of a surge in oil prices with Mr. Pompeo arguing that US and other non-OPEC oil producers have already increased production and replaced Iranian exports.” And, due to a strong economy and low unemployment rate, rising oil prices may not do much damage.
In US News, Scott Hoyt explains that rising prices are “coming at a time when consumers are relatively well positioned to handle it. Job growth is strong. Wage growth is healthy.” In past years as gas/diesel prices increased, freight companies added fuel surcharges. There’s no evidence of these yet. Depending on the overall business climate and whether prices continue to climb, these may occur again — only time will tell. For now, the final outcome and impact on US businesses remains to be seen.