Iran conflict jolts oil markets: Will Long Island gas prices rise?

The market-shaking effects of U.S. military strikes on Iran this weekend have already pushed up crude oil prices — a move that could translate into higher gas prices on Long Island within days, experts said. 

Military strikes on Iran rattled global markets early Monday, with the S&P 500 falling as much as 1.2% at the start of trading, led by a more than 6% increase in crude oil prices, according to The Associated Press. Later in the day, U.S. stocks quickly erased those losses, and the index finished the day with a gain of less than 0.1%. 

The markets rebounded in part because past military conflicts have not usually created sustained drops, the AP reported. 

The United States is the No. 1 producer of crude oil in the world, making 11.5 to 12 million barrels per day, and U.S. crude oil supplies are unlikely to be disrupted, said Robert Sinclair Jr., senior manager of public affairs at AAA Northeast. 

“Our crude oil supplies are insulated from any disruptions that might happen in the Middle East,” Sinclair Jr. said. 

But since crude oil trades on a global market U.S. consumers are still subject to price increases driven by overseas instability.

Crude oil prices rose Monday to $72.43 per barrel from $65 last week, Sinclair said.

On average, a $10 increase in the price of a barrel of crude translates to roughly a 25- to 30-cent increase per gallon at the pump, Sinclair said.

Sinclair noted that the national average price for gasoline is about 11 cents higher than a week ago, though much of that increase reflects the seasonal shift to more evaporation-resistant summer gasoline blends.

On Long Island, where the switch to summer blends does not typically occur until April, prices have remained comparatively lower.

Nationally, the average price per gallon is $2.99. On Long Island, the average is $2.87, compared with $2.86 a week ago and $2.83 a month ago, Sinclair said.

Although it can take 20 to 30 days for higher crude prices to filter through to consumers, Sinclair cautioned that some retailers may raise prices sooner in anticipation of increases.

“You cannot discount the opportunism of the retailers, especially when everyone is expecting gas prices to go up,” he said.

The conflict could disrupt oil supplies from Iran and elsewhere in the Middle East, the AP reported. Attacks in the region — including on two vessels traveling through the Strait of Hormuz, the narrow mouth of the Persian Gulf — have constrained oil exports.

About one-fifth of global oil and natural gas pass through the waterway, Stephen Innes of SPI Asset Management said in a commentary.

Prolonged disruptions to oil flows through the Middle East would have “huge implications for oil and LNG  [liquefied natural gas] and every market everywhere if it occurs,” RaboResearch Global Economics & Markets said in a report. “Energy is an input to all production.”

Steven Kent, chief economist at the Long Island Association business group, said the conflict could potentially impact the regional economy.

While some bulk goods and supplies are brought to Long Island via rail, the majority of products sold by local businesses and materials used by local manufacturers are brought here by truck, Kent said.

“Even if a product doesn’t require fuel, the production and the transport of it does,” said Kent, an associate professor of economics at Molloy University's School of Business.

Additionally, because gas and oil are not products that can be stockpiled by end users or sellers, global market pricing trends have an easier time working their way through the supply chain, he said. 

The U.S.' own production of crude oil will be instrumental in mitigating the worst of price increases, said Bob Catell, chairman of the Advanced Energy Research and Technology Center at Stony Brook University. 

"The U.S. is very much more independent today than it used to be,” said Catell, former chairman for National Grid. “While it will have some impact, I don’t think it will have as dramatic an impact.”