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Consumers struggling with higher gas prices as a result of the Iran war may wonder: with talk of negotiations toward a potential ceasefire, how long would it take to feel relief if the conflict ends?
Since the war began nearly a month ago, gas prices have spiked as a knock-on effect of higher oil prices.
“If you’re low on gas, I’d fill up because I don’t think you’re going to see a resolution of this in the next three or four, five days,” says Jon Allen, a senior fellow at the Bill Graham Centre for Contemporary International History at the University of Toronto.
“I think if there’s going to be a negotiation, it’s going to take some time.”
About 20 per cent of the world’s supply of crude oil has been choked off in the Strait of Hormuz, a vital shipping channel in the Persian Gulf region that Iran has been using for leverage by threatening any ships allied with the U.S. and Israel that try to pass through.
At one point during the conflict, some crude oil prices reached nearly US$120 per barrel.
Amid the volatility of ceasefire proposal talks and Iran’s rejection of the U.S. proposal on Wednesday, the price has continued to fluctuate but hovers around $90 as of publication.
“Energy markets are famously volatile and it has always been impossible to predict where things will go because it’s a market where small changes in supply can have big changes in price, and a lot hinges here on how long that lasts,” says Trevor Tombe, a professor of economics at the University of Calgary.
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“We see big moves in oil prices up and down, sometimes just depending on what the president tweets one day or another. So it’s really hard to see where we go from here, but it does look like oil prices have fallen a lot in the past couple of days, just on the prospects of potential peace.”
On Wednesday, Iran dismissed the idea that the war could pause, let alone end anytime after receiving an American proposal for a ceasefire.
That came after Trump said on Tuesday that the U.S. was “in negotiations right now” with Iran.
At the same time, the Associated Press reports that at least 1,000 U.S. troops are being sent to the Middle East in the coming days.
All of this uncertainty means consumers shouldn’t expect gas prices to come down anytime soon because the future of the Middle East conflict, and more specifically the reopening timeline for the Strait of Hormuz is unclear.
“These things change every day,” says Allen.
“Donald Trump can say whatever he wants, and he can offer whatever he wants, but if Iran doesn’t like it, they’ve got a stranglehold on the Strait of Hormuz.”
When it comes to negotiations between the U.S. with Israel and Iran, Allen says, “they’re pretty far apart.”
This means the war may not be ending anytime soon, and even if a proposed ceasefire or end to the war is in the works, consumers may be paying for the conflict for weeks or even months after. That’s because there is a lagging effect that higher prices for resources like oil and fertilizer can have on prices consumers wind up paying for things like gas and groceries.
“A lot does depend on how long oil prices remain high for. For food, you typically see a six to nine month lag between producer cost changes and consumer price changes,” says Tombe.
“If oil prices do fall back to where they were, and I don’t believe anyone’s predicting that will occur, then instead of seeing affordability ease, we’ll just avoid affordability worsening.”
–with a file from the Associated Press
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