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As the war in Iran approaches its third week, the economic crisis it touched off is worsening. Iran has largely blocked shipping in the Strait of Hormuz<\/a>, the key waterway between the Persian Gulf and the Gulf of Oman through which 20 percent of the global oil supply passes. It is also attacking ships that attempt to make the journey and targeting oil facilities around the gulf. The resulting chaos has sent oil prices through the roof and rippled out to consumers across the world, including Americans who have noticed that filling up their cars suddenly costs quite a bit more.<\/p>\n Iran\u2019s new supreme leader has vowed to keep choking off the strait<\/a>, and despite President Trump\u2019s occasional declarations of near victory, there is no firm end in sight to the war he began. So how much worse will one of the biggest oil shocks in history get if this keeps dragging on? On Wednesday, I spoke with Patrick De Haan<\/a>, a petroleum analyst with GasBuddy, about the risk of a prolonged conflict in Iran keeping the Strait of Hormuz inaccessible and whether Americans could be paying $4 a gallon for gas in the coming weeks.<\/p>\n We\u2019ve seen gas prices rise significantly across the country with some states seeing jumps of 40 to 50 cents in the course of a week. How likely are things to get worse before they get better? Administration officials have given conflicting timelines for how long U.S. military involvement will last, with Trump projecting four or five weeks at the start of the war. What are the potential repercussions of a shipping blockage if hostilities extend beyond that? If another month goes by, 600 million barrels will be lost to the Strait shutdown. Farmers in the United States would have no fertilizers\u00a0 to put on their fields, which would yield to diminished food yields. None of this looks good. I just wonder when the president or one of the people that whisper in his ear are going to start telling him what he really needs to hear. I really can\u2019t imagine if it goes another month.<\/p>\n President Trump has raised the possibility of the U.S. providing naval escorts to oil tankers attempting to travel the strait, and Energy Secretary Chris Wright briefly said this was happening before backtracking<\/a>. Could that kind of security measure help much? The other point of contention is that the president\u2019s been talking about helping with reinsurance or insurance. I don\u2019t know anyone anticipating a hurricane who says, Oh, I can\u2019t wait to deal with insurance on this. That\u2019s a stopgap measurement. So I think the president\u2019s offered a lot of lip service and the market\u2019s just reading right through it. Nobody\u2019s willing to take the risk.\u00a0 There has been talk of some Greek shippers who have basically turned off their locators or their locators and just gone right on through. I don\u2019t know who\u2019s insuring that company, but I don\u2019t think it\u2019s going to grow in popularity, you know?<\/p>\n Even on Trump\u2019s original four-to-five-week timeline, would we see gas prices cross the $4 mark? If the war does end soon and shipping returns to normal, is there a sense of how long might it take for gas and oil prices to stabilize? This interview has been edited for length and clarity.<\/p>\n Sign Up for the Intelligencer\u00a0Newsletter<\/p>\n Daily news about the politics, business, and technology shaping our world.<\/p>\n Vox Media, LLC Terms and Privacy Notice<\/p>\n
We can tie that answer directly to what happens in the Strait of Hormuz. If things start to improve, they will get better. But that doesn\u2019t look like it\u2019s happening yet. Oil prices jumped another 5 percent on Wednesday, even on a day the International Energy Agency announced it was going to release oil<\/a> in an accounting move of shifting it from commercial inventories to calling it emergency reserves, the market shrugs off what they\u2019re trying to do here. So how much higher could we go? Qatar\u2019s energy minister suggested $150 a barrel. Iran has said $200 a barrel. The truth is nobody can give you an articulate, accurate answer. As long as the strait is blocked, the world is consuming about 80 million barrels while demanding 100 million barrels. The price of oil, subject to economics, is going to go up until demand goes down to match that new 80 million barrel reality that can be shipped. So is that $150, or is it $200? Is it $250? Nobody really knows.<\/p>\n
I really wouldn\u2019t want to see it. It would probably turn into a much larger conversation about how much the economy would contract before we figure this out. It\u2019s not just oil; it\u2019s fertilizers, feed stocks, blend stocks, petrochemicals. Everything is held up in the Strait of Hormuz right now, and if it goes another month, there\u2019s going to be a lot of collateral damage and cascading outages and shortages. There\u2019s an incredible weight to this that gives me hope people are going to pay attention. But I don\u2019t think the White House sees the gravity of what they\u2019re doing here. They\u2019re doubling down and saying, we\u2019re not talking with Iran. This is not leadership. This is just reckless.<\/p>\n
He\u2019s offered that since last Saturday, I believe, and I don\u2019t believe it\u2019s had any meaningful impact. In fact, with Iran threatening U.S. carriers, you might want to not have a U.S. military boat off your stern, because it may increase the risk that you\u2019re attacked. I\u2019ve been trying to find the language to make these comparisons. It\u2019s hard to find a perfect parallel, but it\u2019s probably like taking somebody to a zoo, showing them the grizzly bear exhibit and saying, Yeah, walk through there. And somebody else is\u00a0like, I don\u2019t really trust you. And maybe some people are like, Okay, I\u2019ll do it. But the people that have sense are not going to walk through. Even if your hand is held, you\u2019re still not going to risk the grizzly coming after you because you probably know it will. So, you don\u2019t want to poke the bear \u2014 I guess that was no pun intended \u2014 but that\u2019s what the president\u2019s basically asking. He wants people to toughen up.\u00a0There was an image of a Thai flagged tanker<\/a> that had been struck. And the president had said, Oh, go through it, go through it. It\u2019s fine. And now we have vessels being struck or continue to have vessels being struck. And a story I read said that the Navy\u2019s denying every single request <\/a>for escort.<\/p>\n
If we\u2019re sticking with the original timeline, absolutely. I don\u2019t think anyone in the White House calculated that what would happen when you go to war with Iran is that they would turn the Strait into a war zone. From an analyst\u2019s perspective, we said a year ago when the president started talking about Iran: let\u2019s not go down this route, because we know what\u2019s going to happen. And now it has happened. This is the number one way that they could be very effective at impacting the United States in a way that\u2019s critical and speaks to everyone is block this waterway. They\u2019re going to go down swinging. So, from the get go, I don\u2019t know how this wasn\u2019t perceived.<\/p>\n
They\u2019ll stabilize pretty quickly \u2014 depending on if you\u2019re imagining everyone fully confident about going through the strait. I don\u2019t know if that\u2019s realistic, but it might be. But once we get a clear signal that ships can start freely transiting with very low risk, it would probably be just a week or two before gas prices start to decline noticeably. But it probably would take a month or two, if not three, to fully restore everything back to where it would have been. And every day that goes by is like an exponential increase in the recovery time needed, because time is our worst enemy now. Every day that we stand still, 20 million barrels can\u2019t move. And when it does start moving, there\u2019s so many vessels in the world that have so much cargo to move that it\u2019s going to take a couple of months to smooth this all out.<\/p>\n