Energy consumers are bearing the brunt of the economic impact from the war in Iran, a panel of experts agreed, while natural gas producers and oil-producing U.S. states are expected to see some benefit.
Speaking yesterday during a WisPolitics-State Affairs virtual luncheon, Customers First! Coalition Executive Director Kristin Gilkes noted those who are most exposed to volatile energy prices will likely see the greatest impact from the conflict. That includes low- to middle-income people and rural residents as well as larger energy customers such as industrial users.
Since the United States and Israel began their assault on Iran last month, U.S. gas prices have risen by nearly a third. In Wisconsin, average gas prices are up nearly 45% versus a month ago, according to a fuel price tracker from AAA. The key trade route for oil exports in the region, the Strait of Hormuz, has been effectively blocked by Iran as the conflict continues.
“I’ve heard of larger customers who have energy bills over $1 million a month, so these fuel costs can really directly impact them,” Gilkes said. “Obviously, we want to help sort of mitigate those shocks through effective utility regulation, that encourages utilities to do that long-term planning, use hedging, use long-term contracts to help keep those prices low.”
Tom Barrett, the former U.S. ambassador to Luxembourg and Milwaukee mayor, noted major American oil companies have seen their stock rising “significantly” over the last month or so. He sees them as benefitting in the short term amid lower supply and consistent demand driving up fuel prices.
“In the long-term, it still is anybody’s guess,” he said. “What is our endgame in Iran? Are we going to be successful at having a regime change? Are we going to be successful in making the Strait of Hormuz safe for travel, and when will we make it safe for travel?”
In the meantime, consumers in Wisconsin “are feeling it right now, there’s no question about that, and they’re going to continue” doing so, he added. Barrett said even if the conflict ended tomorrow, the higher prices at the gas pump would persist for some time.
While Asia and Europe are more reliant on the oil that typically moves through the strait, panelists noted the global interconnectedness of energy markets means prices are rising everywhere.
Meanwhile, ex-U.S. Ambassador to the Czech Republic Rick Graber said it’s “certainly possible” the price increases could lead to more fuel production domestically.
“It just makes common sense, the way to protect against stuff we cannot control beyond our borders is to produce more,” he said.
Peter Barca, a former Dem lawmaker and cabinet secretary in Wisconsin who now represents Natural Allies for a Clean Energy Future, said it’s “totally unpredictable” how long the strait will remain closed to commercial traffic.
“The biggest winner is U.S. natural gas suppliers,” he said yesterday, noting demand for their fuel is growing “exponentially” amid the conflict.
Barrett also pointed to projections that Texas will get an additional $1 billion in tax revenue due to rising prices, noting gas-producing states “are going to make out like bandits in this thing” if prices remain high.
Graber also said higher oil prices substantially benefit Russia, helping to fund its ongoing war in Ukraine.
“If Russia’s doing well, the loser is obviously Ukraine and the Ukrainian people, which is unfortunate in many respects,” he said. “Certainly consumers in the short-term are losers. Iranian people are losers in all of this. I think there’s a lust for change in that country, and I hope it comes about. But they’re losing, and they’re struggling through all of this.”
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