Higher oil prices not boosting Houston economy yet due to conflict with Iran, expert says

Here in the “Energy Capital of the World”, you likely know that when oil prices are high, it can be beneficial for our local economy, even if it is tough on most Houstonians.

A local expert explains, though, that it is not the same case this time as the conflict in Iran continues.

According to AAA, the average price for a gallon of gas in Houston is currently $3.04, which is slightly lower than the average across the state, but up 60 cents a gallon on average compared to last month.

This rise in prices is happening because of the war going on in Iran.

The Straight of Hormuz is effectively closed, meaning not as much oil can pass through, lowering the overall supply, which raises prices.

When you reduce the supply by 20%, which is what’s happened, then the price responds,” explains Steven Craig, professor of economics at the University of Houston.

Craig says even though often higher oil prices usually mean a boost for our local economy, that’s not what’s happening this time.

“For Houston, the reason high energy prices give us prosperity is because we get paid often on drilling. This is a temporary thing, so drilling hasn’t started any more than it was…so one of the hard things now is that as consumers, we are paying and nobody’s income is changing yet,” said Craig.

So how much longer will these higher gas prices last?

Craig said they will last until this conflict is over, and even then, it may not be smooth sailing.

“We sort of had that adventure with Venezuela. I don’t know what’s going to happen there anymore, and what’s the next country? There’s lots of countries that we have political problems with that are important in this market, so I don’t know what’s coming next,” Craig said.

Craig said one of the best things you can do for your family is to try to save up and have an emergency fund, so when you do have to pay higher prices for a month or two, you have some cushion to fall back on.

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