NEW ORLEANS (WVUE) – Oil prices are not oblivious to the tensions between Israel and Iran and the recent bombing of Iran’s nuclear facilities by the U.S.
Oil prices have slumped. A barrel of U.S. crude fell 6% to around $64, and Brent Crude, the international standard, had a similar drop.
“There’s obviously the war has threats that are associated with it for shipment of oil; 20% of the world’s oil flows around one side of Saudi Arabia or the other,” said Prof. Eric Smith of Tulane University’s Energy Institute.
Oil prices began falling sharply on Monday. Smith says low oil prices are not good for oil companies and related jobs in Louisiana.
“We need higher prices than $60 a barrel in order for the refineries to thrive. And if the refineries are thriving, they’re hiring people. Each refinery hires 1000 people, let’s say, and we’ve got 11 of them, so there’s quite a few people,” Smith said.
Amid the U.S.-Iran tensions, there are concerns that Iran might shut down the Strait of Hormuz, which is a key shipping route for oil and gas.
“It’s only about 6 miles wide where it’s deep enough to navigate ships through it and it’s the major entry and exit point for both crude oil as well as LNG,” said Smith.
Refineries rely on heavy crude..
“We have to import a certain amount of oil, no matter how much oil we produce. Our refineries were built to run on a certain amount of heavy oil, and we don’t produce enough heavy oil ourselves,” Smith stated.
Some of that oil comes through the Strait of Hormuz.
“That’s right,” said Smith.
Some who are watching the situation in that part of the world closely doubt Iran will tamper with the critical waterway.
“I doubt they would do that because the number one consumer of Iranian oil is China,” said Dr. Michael Wallace, a retired military intelligence officer, who is program director for Tulane’s Emergency & Security Studies Program. “So any blockage of the Strait of Hormuz is going to really affect China. China doesn’t want it.”
Lower oil prices help at the gas pump.
“It sounds a little inconstant, but the [Trump] administration likes low oil prices in the U.S. because that means low gasoline prices and low gasoline prices mean votes,” Smith said.
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