A war in the region could greatly disrupt the traffic of tankers transporting oil out of the Straits of Hormuz. In addition, market speculators would likely cause serious price fluctuations.
If Israel does attack Iran, oil prices can be expected to soar, which would in turn push up both gas prices and electricity rates at home.
The hike would be a result of a combination of factors: A war in the region could greatly disrupt the traffic of tankers transporting oil out of the Straits of Hormuz. In addition, market speculators would likely cause serious price fluctuations.
The impact on oil prices, however, could be mitigated at least somewhat by the drop in demand that has resulted from the global economic slowdown.
Prices at the pump would be the first in Israel to reflect a sharp rise in oil prices, followed by the prices of diesel and other fuels. After that, electricity rates would be forced up.
The Israel Electric Corporation is the country’s largest petroleum consumer, spending up to NIS 100 million a day recently for coal, diesel, fuel oil and natural gas to run its power-generating plants. Only the last of these is not linked to the price of petroleum. Due to the recent shortage of natural gas, however, it currently accounts for only 8% of the fuels used to produce electricity, a figure that is not expected to rise until mid-2013, when the Tamar offshore field is expected to begin gas production.
Petroleum prices are already climbing in response to rising tension in the Middle East and fears of an Israeli attack on Iran, but they have not spiked. Brent crude rose above $114 a barrel yesterday, for the first time in three months, an increase of around 1.5%. But even after the price climbs of recent weeks, that is far below the all-time high, reached during the global economic crisis of 2008, when crude oil went for nearly $150 per barrel.
Oil prices again skyrocketed in March, when Iran threatened to block the Straits of Hormuz as a response to economic sanctions. A barrel of Brent crude exceeded $120 at the time.