By Barry Eitel
SAN FRANCISCO (AA) – Oil prices leapt Wednesday, a day after President Donald Trump announced he was pulling the United States out of the Iran nuclear agreement.
The price of Brent crude oil, considered the international benchmark for oil prices, surged 3.15 percent to close at $77.21 a barrel on the Intercontinental Exchange Futures Europe. Brent is now trading at its highest price since late 2014.
On Tuesday, Trump announced he would exit the landmark Joint Comprehensive Plan of Action (JCPOA) nuclear deal signed in 2015 with Iran and several other nations. The move was widely expected, and the White House immediately prepared to sanction Iran and companies that do business there.
The proposed sanctions, which are not yet in place, would impact Iranian oil, and oil companies are now searching for other sources.
The fear was already being felt at the pump by Americans – the average nationwide price for a gallon of gasoline increased to $2.83 on Wednesday, according to transportation analyst AAA. The price is about 50 cents higher than on the same date in 2017.
In a research note, Gregory Daco of analyst firm Oxford Economics pointed out that Iran’s oil production has grown around 1 million barrels per day to 3.8 million barrels per day since U.S. sanctions were lifted last year. Iran is fifth in the world in terms of oil output, and new sanctions could reduce global oil production significantly, possibly as much as 600,000 barrels per day by 2019, Daco wrote.
Analysts have also pointed out that rising gas prices could deplete money saved by the average American due to the tax overhaul bill passed late last year by Trump and Republicans in Congress.
“For the U.S. economy, a prolonged rise in oil prices could reverse part of the benefits from the fiscal stimulus,” Daco wrote.