Despite a tentative deal to end the Iran war, experts warn that higher prices for gas, groceries, and flights will persist. The conflict disrupted supplies of crude and refined fuel, as well as supply chains for fertilizer, food, and other essential items.
Gas Prices
US motorists can expect some gas price relief, but it will take time. Oil prices fell to about $80 for a barrel of US benchmark crude following the news of the tentative agreement. However, refineries typically pay for crude oil a month or more in advance, so they won’t immediately be processing cheaper products.
According to Michael Lynch, a distinguished fellow at the nonpartisan Energy Policy Research Foundation, the tendency of gasoline prices to fall slowly is partly because the raw material takes weeks to work through the system until it’s delivered to consumers. Mark Barteau, a professor of chemical engineering and chemistry at Texas A&M University, notes that in places without enough refining capacity to meet their needs, such as the West Coast of the US, gas prices will take longer to drop.
Grocery Prices
Reopening the strait is unlikely to deliver instant relief at the grocery store. Fuel accounts for roughly 15% to 30% of the total cost of food, and it can take months for an energy shock like the one caused by the Iran war to wind through the food supply chain and raise grocery prices. David Ortega, a professor of food economics and policy at Michigan State University, expects inflationary pressure on food in the coming months.
Shipping Industry
The shipping industry is also expected to feel the effects of the war for some time. Judah Levine, head of research at the freight booking platform Freightos, notes that the Strait of Hormuz closure has affected about 2% to 3% of the total volume of container ships used for global shipping. Josh Steinitz, chief strategy officer of the business logistics platform ShipStation Global, warns that consumers might notice higher shipping costs and more out-of-stock items online until the end of the year.
Original reporting: KTBS 3 (Shreveport) — read the source article.
