On Tuesday, May 8, 2018, Donald Trump announced his decision to pull the U.S. out of the Iran Nuclear Deal. The deal, signed in 2015 under the Obama administration, was an agreement between Iran and six other nations: U.S., UK, Russian, China, Germany, and France. It happened after years of concern over Iran’s expanding nuclear base, concerns which persisted despite Iran’s claims that its nuclear program was entirely peaceful. The agreement required Iran, amongst many demands, to reduce its uranium stockpile by 98% and to accept additional outside surveillance in work sites suspected suspicious.
It is widely known that Iran is an OPEC (Organization of the Petroleum Exporting Countries) nation. As such, the decision to end the Iran Nuclear Agreement may have some impact on the prices of oil and gas within the United States.
Once the agreement comes to an end, sanctions placed on the purchase of Iranian oil, some of which were removed under the Iranian Nuclear Deal, will come back into place. This means that the U.S. could lose access to hundreds of thousands of barrels of oil, which will bring down the market supply of the good in this country. Considering that demand for Iranian oil remains strong, this could have a significant upward effect on the market price of oil, which is the primary capital good used to produce gasoline.
Yet there is some hope in other factors as potential price limiters. Some experts recognize, for example, that Saudi Arabia has the ability to fill the gap in market supply left after restoration of the sanctions. Others point to the increasing production of oil within the United States, claiming that in the next decade, the country may not be as reliant on foreign oil as historically seen.
And indeed, if these factors are considered, the rise in gas prices brought on by Trump’s decision to break the agreement may be neutralized. And so, even though the breaking of the Iran Nuclear Deal allows Iran the freedom to re-start its production of nuclear inputs in mass and thus brings the world into a time of constant nuclear threat, at least there’s hope that the pockets of US consumers won’t be too hurt. Right?
