Jaguar Journal is a monthly series in which A&M-San Antonio faculty share their expertise to help explain the science, trends, and issues behind today’s headlines.
As ongoing war and rising tensions in the Middle East disrupt global energy markets, Americans are feeling the impact at the gas pump. According to Dennis Elam, an associate professor in the Department of Accounting & Finance, the immediate concern is the Strait of Hormuz, a critical waterway through which a significant portion of the world’s oil supply moves.
“The war in Iran affects gas prices because it has choked global oil supplies by halting shipments through the Strait of Hormuz, raised crude oil costs, and created widespread market uncertainty,” Elam said.
While the U.S.–Iran conflict continues to shift almost daily, Elam said consumers should not expect gasoline and diesel prices to quickly return to previous levels even if the Strait of Hormuz fully reopens and oil shipments resume.
A major factor is the nation’s limited refining capacity.
“There is a refining shortage,” Elam said. “The last refinery built in the U.S. was in the 1970s. Every refinery is at capacity. There is literally no way for a surge in supply of gasoline or diesel.”
That means the price of crude oil is only part of the equation. Even with additional oil available, the United States has limited ability to turn that crude into the gasoline and diesel consumers need. Elam said the result could be continued pressure at the pump even if geopolitical tensions ease.
He said the current situation illustrates how quickly geopolitical events can move oil prices. After crude prices declined to about $55 per barrel last year, prices surged to roughly $120 following the outbreak of war in February 2026. When diplomatic discussions temporarily eased concerns, prices fell back toward $70 before rising again as tensions returned.
Elam described the price movements as more than coincidence. Because oil is traded in a global market, price differences between regions create opportunities for arbitrage— buying a commodity where it is less expensive and selling it where it commands a higher price—helping push prices toward a common global level. As a result, disruptions in one part of the world can affect consumers thousands of miles away.
He also said Iran has demonstrated an ability to continue selling oil despite international sanctions. One method involves so-called “shadow ships,” in which oil is transferred between vessels before reaching buyers, making it more difficult to trace the oil back to Iran.
For Elam, the current conflict also carries important historical lessons. He was working in West Texas during the oil embargoes of the 1970s and remembers watching oil prices rise dramatically. During the second embargo, he said, oil climbed from about $10 per barrel to $36 in roughly 18 months. The effects took years to unwind, contributing to the eventual collapse of parts of the Texas oil economy in the 1980s.
That experience makes Elam cautious about assuming today’s disruption will be short-lived. He believes the oil market has entered a period of higher prices and that consumers should prepare for continued volatility.
Still, Elam is not pessimistic about the long-term future of the oil industry. Major companies such as Chevron and Exxon, he said, have extensive experience operating in difficult geopolitical environments.
“Oil prices will fluctuate,” Elam said. “We’ve seen it before, and we’re seeing it again. The lesson is that when geopolitics disrupts the oil market, consumers feel the effects long after the headlines have changed.”
Dennis Elam is an associate professor in the Department of Accounting & Finance. He worked for a family-owned oil-field business in West Texas from 1976 to 1989, where he handled accounting. He also writes a weekly energy column for the Odessa American, drawing on his industry experience and his interest in energy markets and history.