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Iran Nuclear Deal Could Drive Down U.S. Gas Prices

Iran Nuclear Deal Could Drive Down U.S. Gas Prices

By Ed Felker and Lauren Gardner, CQ-Roll Call (TNS)

WASHINGTON –– The tentative deal designed to limit Iran’s nuclear program led to a quick — though modest — decline in oil prices, raising the possibility that U.S. drivers may enjoy a prolonged break from high gasoline prices and creating an opening for Republican lawmakers to step up efforts to end a ban on exporting domestic oil.

Analysts at Washington-based ClearView Energy Partners noted that lifting economic sanctions against Iran could return as much as 1 million barrels a day to world markets, flows that have been cut off because of the economic sanctions imposed by the U.S. and other western nations.

That new flow could depress world prices by as much as $12 below the $67 per barrel predicted by the end of 2016 by the Energy Information Administration, a forecast that assumed sanctions wouldn’t be lifted.

“We don’t want to belabor the obvious: The Iran deal is bearish for crude,” ClearView said in a note to clients.

EIA Administrator Adam Sieminski in April told the Senate Energy and Natural Resources Committee that higher Iran oil exports would either depress world prices by as much as $15 a barrel next year, or cause global production to slow.

The world price of oil is the key driver of U.S. gasoline prices. The national average price for unleaded regular was $2.78 a gallon on Thursday, according to data compiled by AAA.

If the EIA’s predicted average summer price of $2.67 a gallon holds true, it would be the lowest since 2009. The EIA attributed the low prices to the 41 percent decrease in the price of international benchmark Brent crude since last year.

The prospect of prolonged pressure on oil prices comes as U.S. producers seek a relaxation of the ban on most exports of domestic crude.

They have argued that without access to world markets and expected flat demand in the U.S., growth in oil production and direct and indirect industry jobs will level off or decline.

Barry Russell, president of the Independent Petroleum Association of America, said recently the prospect of higher Iran oil exports will put U.S. producers at a “competitive disadvantage,” and that the ban should be lifted.

“As soon as Iran is permitted to export its surplus oil on the world market, why can’t we allow our own companies to do the same with their American-made surplus of crude oil?” he said.

The American Petroleum Institute also called for lifting the ban.

Photo: The Iran deal could mean good news for consumers at the pump. AFP/Justin Sullivan

Starbucks Raising Prices

Starbucks Raising Prices

By Angel Gonzalez, The Seattle Times (TNS)

SEATTLE — Starbucks is raising the price of a typical coffee run in its home base of Seattle at a rate that far outpaces the rest of the U.S., the latest sign of a steamy local economy here that is bolstering both salaries and the cost of doing business.

Hikes in the prices of some popular beverages will bring the average Starbucks ticket across the U.S. up 1 percent, says spokesman Jim Olson.

But in 300 stores in the greater Seattle area the increase will be 3.5 percent. That’s far ahead of overall consumer prices for the area, which according to Bureau of Labor Statistics rose 0.4 percent in April from the year before.

The price hikes, which take effect Tuesday, come at a time when economic observers are wary about deflationary pressures in the economy. Even the cost of coffee beans has come down significantly in the past year.

Inflation at Starbucks in Seattle, however, will run high for those who only buy brewed coffee. They will pay between 10 and 20 cents more per cup — 10 cents is a 5 percent increase for a tall drip coffee.

A tall latte in this region will see a nearly 10 percent hike of 30 cents per cup. If all prices in the U.S. were rising that fast, inflation would be comparable to the West African nation of Guinea, which last year had the world’s 10th highest rate of inflation.

Starbucks won’t say what goes into its price adjustments, or divulge how much prices will go up in other individual markets.

The increasing difference between Seattle and the average ticket in the U.S. comes in the midst of a strong economy here, propped up by a technology boom, as well as rising costs for real estate and labor. Seattle recently passed a controversial $15 per hour minimum wage mandate that began being gradually implemented in April.

The 3.5 percent increase almost matches the 12-month local increase in average hourly earnings for all private employees as of May, according to federal data: 3.57 percent.

“It reflects confidence in this market as being able to spend more of its disposable income in a small luxury item,” said Chris Mefford, CEO of Community Attributes, a data and economic analysis consultancy in Seattle. Currently, he added, “confidence in the region’s economy is as high as it gets.”

Starbucks’ Olson said that food prices will see no change in the Seattle area, and tea will see only a minimal increase.

Starbucks usually rolls out price adjustments during the summer. Last year it increased the price of the average U.S. ticket by less than 1 percent.

These increases apply only in stores operated directly by the chain, and not those licensed to third parties such as supermarkets or major retailers like Target.

Photo: A flat white is going to cost an extra 10 cents or so. julochka/Flickr

U.S. Inflation Tame Despite Food Price Rises

U.S. Inflation Tame Despite Food Price Rises

Washington (AFP) — Consumer prices in the United States rose a bare 0.1 percent in July despite strong gains in food costs, the Labor Department reported Tuesday.

The slowdown in consumer inflation after three months of faster gains left the year-on-year consumer price index (CPI) up 2.0 percent, a level the Federal Reserve’s monetary policy makers have regarded as non-threatening.

Food prices were up 0.4 percent in the month, continuing a high pace of increases since February which are hitting American shoppers in the wallet. Food costs were 2.5 percent higher than a year ago.

But offsetting that has been a fall in energy prices, with gasoline prices now 0.8 percent down from a year ago.

Less energy and food, both more volatile components of the index, CPI was up 0.1 percent for the month and 1.9 percent over 12 months.

AFP Photo/Frederic J. Brown

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