Gas Prices Calamity: Deciphering Israel's Attack on Iran Escalation and Its Impact on Fuel Costs in Germany
- by Jannik Tillar
- 3 Min
Oil shortages may ensue and gasoline prices might surge due to potential escalation in Iran conflict. - Escalating Iran tensions could potentially boost global oil prices
In the tumultuous aftermath of Israel's bombardment of Iranian facilities, analysts are keeping a hawk-eyed vigil on fuel prices as the working week kicks off. Although contributing a meager three percent to global oil production, Iran holds pivotal significance in the region due to its capability to jeopardize crucial transportation routes. So, it's hardly surprising that bounding indicators have already started pointing toward a hike in oil and petrol prices by weekend's end. For instance, the Amsterdam TTF gas futures contract increased by an impressive 6.6 percent on Friday alone.
This upward trend appears to persist throughout the week, inexorably leading to increased petrol prices in German petrol stations. The air strikes on Iran's South Pars natural gas processing plant have yet to be accounted for in most projections. Shuttered since the attack, the world's largest gas field, to which Iran collaborates with Qatar, is utilized mainly to satisfy Iran's domestic gas demand. Consequently, limited natural gas is exported to the global market.
Numerous analysts concur that this assault signifies a significant threat to the global market. "This is most likely the most vicious attack on oil and gas infrastructure since Abqaiq," asserted Rystad Energy analyst Jorge Leon to Bloomberg News. In 2019, an attack on the Abqaiq oil processing plant and the Khurais oil field temporarily disabled half of Saudi Arabia's oil output from the market. The Houthi rebels in Yemen assumed responsibility for the attack, but other countries like the US fingered Iran. At the time, the oil price peaked by an astonishing 20 percent.
Potential Oil Exports and China Dependence
Whilst consumers might not endure as severe economic consequences as in 2019, several factors suggest that relief could be limited. Nearly all of Iran's oil is intended to cater to its own domestic needs, leaving less petrol available for the global market compared to the situation in Saudi Arabia, where Abqaiq primarily promises oil for the global market.
The significant risk to the global market lies in further conflict escalation. Presently, Iran contributes approximately three percent to the world's oil production - roughly 3.3 million barrels per day, primarily destined for China. However, Iran retains control over vital transportation routes. The world's main focus lies on the Strait of Hormuz, through which around 65 million tons of liquefied natural gas (LNG) pass each day - amounting to roughly 15 percent of worldwide trade. Gas is also shipped to Europe through this waterway.
A total blockage of the strait would be a catastrophic scenario for the markets as per J.P. Morgan estimates, potentially elevating crude oil prices up to $130 per barrel. ING even foresees the potential for a new all-time high surpassing $150, a level last explored in 2008.
Israel's Gas-Focused Assault
A establish blockage of the strait would overshadow any price-subduing effects instigated by recent factors, such as a languid global economy and waning gas storage requirements in Europe.
So far, Israel's strikes have mainly targeted natural gas, which resulted in global oil markets spiking on Friday before gradually subsiding. Following a tremendous jump to $78.5 per barrel of Brent, the price fell back to $73 by close of business on Friday. By Monday morning, it had risen marginally to around $75. This means that the oil price is back to March levels and has recouped the dip that occurred last week when a liter of diesel in Germany averaged €1.72. With historical evidence suggesting that gasoline prices exhibit a swifter reaction to oil price hikes than decreases, it's reasonable to anticipate that filling up in Germany will become more expensive in the short term.
- Gasoline price
- Israel
- Iran
- Gas
- Gas station
- The upward trend in oil and petrol prices, revolving around the attack on Iran's facilities, could lead to increased gasoline prices at German gas stations.
- Analysts suggests that the assault on Iran's infrastructure poses a significant threat to the global market, which might impact various sectors such as the industry, finance, and business, including oil-and-gas industries.
- As Iran primarily caters to its domestic needs with its oil production, a significant risk to the global market lies in further conflict escalation, potentially leading to diminished oil supplies and increased gasoline prices at a global level.
