St. Cloud Economist Warns Of Rising Gas Prices This Summer

Gas prices are on the rise and St. Cloud State Economist King Banaian expects inflation and a rise in interest rates as well.  He says he wouldn't be surprised to see $4 a gallon gas by this summer.

Reason For Gas Price Increase

Banaian explains Iran currently controls the Strait of Hormuz, where oil is transported out of the middle east.  He says as long as they control that region, gas prices will stay high.  Banaian says it is possible the Strait of Hormuz could reopen soon but with Iran's decision to anoint the son of the recently killed supreme leader, this likely means the strait will stay closed longer.  The new leader is Mojtaba Khamenei.

US isn't Dependent on Middle East Oil

Banaian says we live in a world market so even if the United States isn't dependent on middle eastern oil, the lack of oil available to the world market adjusts the demand and increases the price locally.  He says the Trump Administration has hinted at doing some things in the United States to bring down gas prices, but he's not sure what those things are.

Other Economic Impacts

The war in Iran could affect other things.  Banaian suspects the price of goods and services (inflation) will rise and interest rates to go up.  He believes interest rates will get stuck at a higher level over the next 6 months.  Banaian also would not rule out a recession.  He says it is possible the next chair of the Federal Reserve could step in and reduce interest rates, as the current administration would like, but that remains to be seen.

If you'd like to listen to my conversation with King Banaian, click below.