A local economics expert says the recent surge in gasoline prices is directly tied to international conflicts and market fears rather than immediate physical shortages.
Tennessee average prices stand at $3.85 per gallon this week, up some 97 cents in the last month month. Tennessee Tech Assistant Professor of Economics Tim Roberson said the Middle East situation explains the cost rise, from crude oil markets down to neighborhood gas stations.
“I think the key points are the hike in gas prices is 100 percent a result of the conflict in the Persian Gulf, the Strait of Hormuz being closed,” Roberson said. “And a lot of it is because people are worried they won’t be able to get oil or gasoline in the future, driving the price up, and it’s increasingly becoming an actual supply disruption.”
Roberson said the Iranian government has threatened to shoot missiles at ships traveling through the Strait of Hormuz, a narrow channel in the Persian Gulf that handles 20 percent of the world’s oil production. This situation creates two issues, as less oil physically reaches refineries while corporations and governments simultaneously buy futures contracts to guarantee their own supply.
“I would resist the instinct to think that we should put a price control in place, because those high prices reflect either actual scarcity or expectations of actual scarcity,” Roberson said. “And without those high prices we’ll end up with gasoline shortages, people not being able to fill up their tanks.”
Roberson said local gas stations purchase their fuel from wholesalers known as city racks, which buy gasoline from refineries that source crude oil from global markets.
“I would urge you not to get mad at your local gas station for it, frankly, if you see a high price at the pump, they’re just passing on their increased costs to you because, you know, they’re, they’re businesses, they can’t sell their product at a loss,” Roberson said.
Roberson said seasonal changes also impact the market, as increased travel during the summer months drives up demand for both gasoline and jet fuel. Stricter summer pollution controls on refinery blends traditionally add to the cost, though recent waivers from the Trump administration might slightly mitigate the rate of those price increases.
“There’s not really a policy fix in the short run that can fix the, the high gas price situation, other than ending the conflict and allowing physical supply to get through and easing people’s worries about the future,” Roberson said.
Roberson said drivers should focus on personal planning and remain as fuel efficient as possible while the international conflict continues.