Later this year, drivers in the U.S. can anticipate gas prices dropping into the $2 range due in part to the Iran nuclear deal that was announced Tuesday. Once the Iranian oil markets are open, gas prices will only drop a few cents in the beginning. However, huge savings could be seen as early as September according to analysts.
According to Oil Price Information Service’s chief analyst Tom Kloza, “Once we get past Labor Day, we should see gas falling by 10 to 15 cents a month. By December a lot of places are going to see gasoline at $2 or less”.
In an attempt to inhibit Iran’s plans to have nuclear power, several Western countries, the U.S. included, imposed sanctions on Iran. For this reason, it has been almost 20 years since Iran has sold oil to the U.S. Rather than the U.S., Iran has been selling to Turkey, China and India.
It is still unknown how the sanctions will be lifted or what the trade relationship will be like between the U.S. and Iran.
Despite some criticism in Congress pushing for the preservation of the sanctions, President Obama has made clear his intentions to veto these moves. Global oil market prices will go down regardless of these sanctions when Iran begins selling more oil to Europe.
Experts at a Credit Suisse conference revealed that 500,000 barrels of oil could be added daily to the worldwide market by Iran. After the sanctions are lifted, it is projected by the International Energy Agency that Iran could provide around 800,000 barrels daily. FACTS Global Energy says an estimated 30 million barrels are in storage and awaiting sale.
Massive amounts of oil have recently been added to the worldwide market. Countries such as North America, members of OPEC, Russia and now Iraq have ramped up production of oil as demand in China and Europe is being curbed. According to Kloza, Iran’s oil industry infrastructure that worsened under the sanctions, will improve as more Iranian oil is added to the markets next year.