Mounting fears in the markets that clashes in the Middle East could escalate and further disrupt energy supplies briefly pushed the price of oil above $110 a barrel on Friday, while U.S. diesel rose above $6 a gallon.
Concerns over oil supplies, already heightened by the U.S. war against Iran, broadened this week with reports that the Houthi militia had seized a critical port on the Red Sea, presenting a new threat to shipping in the area.
The price of Brent crude oil, the international benchmark, surged before easing to about $106 a barrel, and West Texas Intermediate crude, the U.S. standard, was trading at nearly $101 a barrel.
The average price of a gallon of diesel fuel jumped to $6.06, according to the AAA motor club, a 60 percent rise since the United States and Israel attacked Iran on Feb. 28. In response, Iran has effectively blocked most ships from passing through the Strait of Hormuz, the narrow waterway between the Persian Gulf and the Gulf of Oman. During normal times, about a fifth of the world’s crude oil flows through the strait.
With assistance from the U.S. Navy, a few tankers have been able to get through, but Iran has signaled in recent days that it was willing to be more aggressive in exerting control over the strait.
U.S., European, African and Asian oil refineries have increased production of diesel, gasoline and other fuels to make up for the loss of supplies from the Middle East and Russia, where refineries have come under attack by Ukraine.
But demand for energy is still outstripping supply. As a result, governments, businesses and farmers are having to pay more for the diesel they need to run trucks, farm machinery and other heavy equipment. And homeowners who use heating oil, which is similar to diesel, are growing concerned about their monthly bills as winter nears.
Fuel accounts for as much of 30 percent of food costs in the United States, said Kate Gordon, a former senior adviser in the Department of Energy and now the chief executive of California Forward, a nonprofit business group.
“So far, farmers and trucking companies have been absorbing a lot of this cost increase,” she said, “but with the war continuing on with no end in sight, they are going to pass through more and more of the price jump to consumers.”
Oil remains elevated
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The price of Brent crude, which has been edging higher all week, was trading at about $106 a barrel.
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West Texas Intermediate crude, the U.S. benchmark, was around $101 a barrel.
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Investors and analysts are focused on the continued disruption to shipping in the Strait of Hormuz. The Iranian-backed Houthi militia in Yemen have also restricted tanker traffic in the Bab al-Mandab Strait at the southern end of the Red Sea, which Saudi Arabia has used as an alternative to the Strait of Hormuz.
Stocks are mixed
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Futures on the S&P 500 pointed to an increase when stocks resume trading in the United States on Friday.
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Stocks in Asia, where countries import vast quantities of oil and gas, were mostly lower. Japan’s Nikkei 225 and South Korea’s benchmark KOSPI fell nearly 2 percent.
Gasoline prices rise.
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The national average for gas prices rose to $4.30 a gallon, according to AAA. The price has risen 44 percent since the war began.
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Gas prices don’t move in lock step with crude, usually trailing increases or drops by a few days.
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