Will The Iran Deal Lower Gas Prices? The Nuclear Agreement Means Big Things For Iranian Oil
On Tuesday, negotiators for the United States, spearheaded by John Kerry, put the finishing touches on what will likely go down as the defining foreign policy achievement of the Obama era: the nuclear deal with Iran. The fruit of more a year of labor by international negotiators, the landmark agreement places limited restrictions on Iran's nuclear research in exchange for a slackening of sanctions on the country, and it figures to have a huge impact in countless ways. For example: Will the Iran nuclear deal lower gas prices in the United States?
If there's anything that's worth exercising some caution over, it's trying to predict how geopolitical events will impact oil prices. But in this case, there are good reasons to think the analysts predicting a price drop are right. As part of the deal, the United States' ban on the sale of Iranian oil will be finally be lifted. It's been in effect for a long two decades, the result of a 1995 executive order by President Bill Clinton.
And while it was far from the only factor in play throughout those 20 years, the difference between how much we paid for gas back then and how much we typically do now is pretty stark. In 1995, a gallon of gas cost Americans $1.16 on average, according to the U.S. Energy Information Administration. It might not be the most sophisticated economic point, but it's true nonetheless — as the flow of oil out of Iran increases, lower prices are bound to follow.
Even when adjusted for inflation, per the Bureau of Labor Statistics' calculations, that's just $1.81 per gallon, an absolutely unthinkably low rate by today's standards. Over the last four years, gas prices have averaged more than $3.50 per gallon.
But that $1.81 figure might not be outside the realm of possibility with the restrictions lifted. According to CNN Money, the days of $2 gasoline could be upon us again, by virtue of the immense amount of oil that Iran's expected to pump into the global markets — Bloomberg reported in June that the lifting of the ban could allow Iran to add 400 million barrels per day.
It's worth noting that this isn't entirely good news, depending on your perspective — while lowered gas prices are a nice perk for anybody who's a little light in the wallet, it's bad news for the environment. If there's anything that the human race doesn't need right now, it's a surge in oil production at a time when climate change's effects are becoming more and more pronounced, and are believed to be irreversible. Low gas prices are good news for those lower-income, everyday workers among us, no doubt, but the degradation of the climate is very bad news for everyone.