Oil prices jump to $105 per barrel on Monday after Iran stopped selling crude to Britain and France due to the continuing dispute over the Middle East nation’s nuclear power program.
The move by Iran is causing the price at the gasoline pump to go up, but the Unites States’ lack of refineries is also a big part of the problem according to Oil and Gas Journal editor Bob Tippee.
Speaking on News 92 FM’s Evening Report Tippee said the markets reacted quickly to Iran’s actions:”The markets always anticipate events so when you have a geopolitical event like this the market will reflect that price even before the threat comes true, and if the threat seems to ease the market will relax and the price will come down”, said Tippee.
But Tippee also says the United States’ lack of refining capacity is also a big part of the problem. He pointed to lack of refining capacity in the Northeast as part of the problem now:”Two refineries are closed and another one is for sale and will be closed if it is not sold, and then there was a refinery in the Virgin Islands that exported product into the east coast market that also closed, said Tippee.
It is not unusual for refineries to close for repairs or for other production related events, but sometimes there is not enough refining capacity to pick up the slack when that happens according to Tippee; this results in reduced supply of gasoline which drives up the price at the pump.
“So there has been a big hit in gasoline supply and diesel supply on the east coast and the market is having to accommodate that and that is pulling some product away from this country and raising prices everywhere,” Tippee said.
The result now, according to Tippee is:”a big hit in the gasoline supply and diesel supply on the east coast,” and that is “pulling oil from other regions and raising prices everywhere.”