The war with Iran has brought shipping traffic to a virtual standstill in the Strait of Hormuz, the narrow Persian Gulf channel through which roughly one-fifth of the world\u2019s oil and gas flows. That has sent fossil fuel prices surging \u2014 and with them, the potential for profit.\u00a0<\/p>\n
The price of Brent crude, the global oil benchmark, is up more than 10 percent since the conflict started almost a week ago, and natural gas prices in some places, especially Europe, have doubled<\/a>. U.S. consumers are already feeling the effects, with gasoline around 27 cents per gallon higher than before the war. But industry analysts say that, at least in the short-term, higher prices could be a windfall for producers that aren\u2019t dependent on Persian Gulf supplies, such as Exxon Mobil, Chevron, Shell, and the French company Total.\u00a0<\/p>\n \u201cIf you are operating, if you\u2019re producing, and you\u2019re going to enjoy higher prices for your product, you are going to benefit,\u201d said Abhi Rajendran, who leads oil market research at the analysis firm Energy Intelligence and is a fellow at Rice University\u2019s Baker Institute for Public Policy. \u201cThese high prices are going to be good for energy companies in general.\u201d<\/p>\n Energy stocks are to some degree reflecting those price jumps, with firms like Venture Global and Cheniere Energy seeing notable gains this week. An analysis by the EnergyFlux<\/a> newsletter, for example, found exporters and traders of American liquified natural gas are set to earn nearly $1 billion more per a week based on higher prices. Refineries in the region have sustained damage that will make that business more profitable for companies located elsewhere too. The stock gains aren\u2019t ubiquitous. Exxon Mobil, for example, is down slightly and Chevron has been hovering around its pre-war price. Those more tepid responses could be due to a range of factors, such as geopolitical uncertainty or increased refining costs that come with high prices, but even those companies are probably selling their product for more than they were last week.\u00a0<\/p>\n \u201cYou are opportunistic in a sense. You see a price spike and you want to capture that upside,\u201d said Vincent Piazza, senior equity analyst at Bloomberg Intelligence. At the same time, he said, \u201cI don\u2019t think anyone is happy with volatility.\u201d\u00a0<\/p>\n Shell declined to comment, and none of the other companies named in this article responded to requests for comment. But Piazza said long-term oil and gas futures show that investors expect stabilization, meaning that the gains companies are seeing now may not last. \u201cIt provides them with a modest short-term windfall,\u201d he said. In the 12-month futures market,\u201cprices in the latter months haven\u2019t changed.\u201d\u00a0<\/p>\n Both Piazza and Rajendran made comparisons to the war between Russia and Ukraine. Energy prices skyrocketed at first \u2014 far more than they have so during the Iran conflict \u2014 but eventually moderated. That also implies, of course, that there is still plenty of room for the current situation to continue to escalate before it improves.<\/p>\n President Trump has said US and Israeli strikes could continue for four to five weeks. More than a thousand people have died in Iran since the United States and Israel launched their attack Saturday. Iran\u2019s retaliatory strikes throughout the region have killed more than a dozen civilians and six American troops.\u00a0<\/p>\n The energy impacts have so far been relatively temporary, said Piazza, and confined mostly to delays in delivery. Prices are already coming down off their initial spikes. But if, say, a major gas port in Qatar or oil infrastructure in Saudi Arabia is severely damaged or destroyed, that would drastically change the outlook. A prolonged war could also cause countries like Iraq to shutter production that couldn\u2019t easily reopen<\/a>. EnergyFlux says that if Qatari gas remains offline into the summer, companies could see as much as $20 billion more in profit each week compared to before the war.<\/p>\n \u201cWhat\u2019s delayed, what\u2019s disturbed, and what\u2019s destroyed, I think that\u2019s the whole key,\u201d Piazza said of the benchmarks he\u2019s watching as the conflict continues. \u201cThink of it as a massive storm hitting the Gulf Coast as opposed to a tsunami that wipes out entire sections of infrastructure.\u201d<\/p>\n Rajendran also warns that prices could rise high enough that demand slumps, and it backfires on producers.\u00a0 \u201cOnce you start getting to $100 or $100-plus range, then it starts becoming economically disruptive even for the oil companies,\u201d he said. For now, he says, \u201cas long as oil prices remain where it doesn\u2019t become disruptive and destructive, oil companies are going to benefit.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"The war with Iran has brought shipping traffic to a virtual standstill in the Strait of Hormuz, the…\n","protected":false},"author":2,"featured_media":6405,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[1170,154,34,4079],"class_list":{"0":"post-6404","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-iran","8":"tag-economics","9":"tag-energy","10":"tag-iran","11":"tag-yahoo"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@iran\/116181738603877009","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts\/6404","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/comments?post=6404"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/posts\/6404\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/media\/6405"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/media?parent=6404"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/categories?post=6404"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/iran\/wp-json\/wp\/v2\/tags?post=6404"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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