When Frank Howell heard the news that the United States and Israel had launched a surprise missile attack in Iran on Feb. 28, he knew he needed to act quickly.
He took both his trucks the next day and filled them with gas before prices could rise.
Howell, who spent nearly 40 years working in the oil and gas industry before retiring as vice president of exploration and production for Hunt Petroleum Corporation, said international conflicts always lead to higher gas prices.
That is especially true, Howell said, when that conflict is with a country in the Middle East, which controls about half of the world’s oil supply.
“At one time in the Middle East, it was like two-thirds of the world’s supply or reserves were in the Middle East. Now there’s been development in other countries, and they’re down to about 48%,” Howell said to The Dispatch. “… (So when there is a conflict) consequently, you and I are going to pay for it, or somebody’s going to absorb that cost.”
Matt Bogue, president for Dutch Oil Company, agreed with Howell and said oil markets – and as a byproduct, gas prices – are reactionary to any concerns with production. This includes ongoing issues with key trade routes like the Strait of Hormuz, he said, which connects the Persian Gulf with the Arabian Sea.
“That’s what we’re seeing with Iran, where concerns about escalation and key shipping routes (like the Strait of Hormuz) are driving volatility,” Bogue said in a text to the Dispatch.
Speaking to the Rotary Club of Columbus on Tuesday about the expensive and complicated nature of the gas and oil production, Howell said building an oil rig and fracking to obtain oil costs companies about $8 million today.
To ensure companies are mining in the correct spot, Howell said typically they perform a land study to find large oil deposits. Those companies then drill into the ground either on land or off shore to reach crude oil.
That oil is then sent to refineries and developed into gas, jet fuel, diesel or asphalt, Howell said.
Since working in the 1960s with Exxon, Howell said domestic oil production has trickled off to the point the United States imports more oil than it exports. This has led to a reliance on international oil trade with countries like Iran, Iraq and Saudi Arabia, he said.
“(Oil companies) are not finding anything in the (country outside of Alaska) of any consequence,” Howell said. “… They (are) going to these other countries, (like) Nigeria and so and so forth.”
On Tuesday, average gas prices across the Golden Triangle were $3.30 a gallon, an 82-cent increase from a month ago, according to data with AAA. The average gas price across the country was $3.79 a gallon, which was an 88-cent increase from mid-February.
The price for a barrel of Brent crude oil, the international standard, sat at $103.55 Tuesday, a $31.26 increase from Feb. 27.
Howell said he expects prices to continue to grow or remain close to current prices for the next several months even if the conflict with Iran is settled soon.
“This Iranian situation is going to be totally disruptive, … because once these wells are shut in, you can’t just turn them back on,” Howell said. “ … They are not going to have all that equipment just immediately ready to repair and put back online. So it’s not going to happen, like some people are trying to tell us, in four weeks, six weeks, or whatever.”
Going forward, Howell said he hopes there will be more developments made toward greener energy sources like wind and solar power, because oil deposits are a finite resource across the globe and eventually alternatives will be necessary.
“We need to come up with some alternatives, and we’ve only had a couple of presidents that really understood that,” Howell said. “And one of the problems of the free enterprise system is (it focuses on) what have you done for me lately (to) affect the stock price? It’s not what you’re going to do for me 50 years down the road, and energy is a forever project.”
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You can help your community
Quality, in-depth journalism is essential to a healthy community. The Dispatch brings you the most complete reporting and insightful commentary in the Golden Triangle, but we need your help to continue our efforts. In the past week, our reporters have posted 40 articles to cdispatch.com. Please consider subscribing to our website for only $2.30 per week to help support local journalism and our community.
