How the War In Iran will Affect Our Energy Bills
How will the war in Iran affect our energy bills? (courtesy of Electrify Now)In addition to the immense human suffering caused by the “war of choice” in Iran, a large portion of global fossil fuel infrastructure has been destroyed, damaged, or shut down. Roughly 20 percent of total fossil fuel supply has been curtailed, causing immediate energy shocks worldwide. Energy analysts are calling this the biggest energy crisis the world has ever experienced, and much more significant than the oil crisis of the 70’s. Just weeks into this war, parts of Asia and Europe have already imposed massive energy rationing campaigns. Analysts expect the impacts we will feel in the US will vary by fuel type. Gasoline prices see immediate and dramatic increases |
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The main impact here has been the swift rise in gasoline prices, which react immediately to world oil markets. Average pump prices have risen from $3/gal to over $4/gal in the last month, and continue to creep upward. Larger price increases occurred during the early stages of the Ukraine war, even though a much smaller percentage of the world’s oil supply was affected. US prices are expected to rise further and stay high for months, with some experts projecting that gas could hit $7/gal if the conflict continues for several more weeks.
Natural gas prices are less impacted but volatile |
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The destruction and shutdown of Liquid Natural Gas (LNG) facilities, along with disruptions to shipments through the Strait of Hormuz, has sent LNG prices soaring in Asia and Europe. Experts estimate it could take several years to restore LNG systems to pre-war production levels. However, unlike global oil markets, natural gas markets are more fragmented and localized. Due to this, and our domestic natural gas production, the US is somewhat shielded from the high LNG prices that are having devastating impacts on countries that import LNG. This should minimize increases in US natural gas utility bills, but as we experienced during the Ukraine war, high global LNG prices and increased US LNG exports tend to push US domestic natural gas prices higher, which could raise natural gas utility bills later this year.
Electricity prices are the least affected |
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| While US electricity prices have been rising due to data center demand, new transmission costs, and wildfire mitigation, electric utility bills should be the most resistant to war-related increases. The Ukraine war caused a very modest rise in electric rates. This is because nearly 60% of electricity generation comes from renewables, nuclear, hydro, and coal which are not affected by this energy crisis, and natural gas generation uses methane extracted in the US.
So, while we will be seeing price increases everywhere due to the war, from food to commodities to energy, with destabilizing impacts on global economies reliant on LNG imports, the biggest energy impacts in the US will be seen at the gas station. Gasoline prices could conceivably double from pre-war levels, and are likely to stay high for months. This conflict is an urgent reminder of the need to accelerate the transition to safer, lower-cost, and more widely available renewable energy. This is true for individuals and for entire countries, to avoid the economic and environmental costs of fossil fuels, and the national security risks inherent in their uneven distribution. |