The average price of a gallon of gasoline hit $4 Tuesday for the first time since mid-2022, as the cost of oil surges due to the Iran war.
In the month since the U.S and Israel attacked Iran, the average price of unleaded gas has spiked more than a dollar a gallon. On Tuesday morning, the average price nationwide was $4.02 per gallon, motor club AAA said.
It’s not just retail gasoline. The diesel fuel used to power trucks delivering goods to stores, farm equipment and public transit has risen to $5.45 per gallon, more than $1.80 higher than it was a year ago.
Driving that is the soaring cost of crude oil worldwide. U.S West Texas Intermediate (WTI) crude has risen more than 50% since the war began Feb. 28, while Brent, the international benchmark, has seen a jump of nearly 60%.
On Monday, U.S. crude oil settled above $100 per barrel for the first time since Russia’s full-scale invasion of Ukraine in 2022. Brent crude oil is poised to see its largest one-month increase on record.
Oil prices had already started rising before the war began, fueled by fears that a conflict was imminent. Since the start of the year, the cost of U.S. crude oil is up more than 80% and Brent has skyrocketed almost 90%.
In response to strikes by the United States and Israel, Iran has effectively blocked shipping through the Strait of Hormuz, a critical channel off its southern coast. Tehran has also attacked its Gulf Arab neighbors, who are major oil producers.
Typically, more than 20% of the world’s oil supply moves through the waterway. But Iran has repeatedly threatened to attack ships if they move through the Strait without permission or if they’re associated with the U.S. or Israel. Several tankers have been hit.
As a result, many tankers are stranded in the Persian Gulf, unable to deliver their products to markets.
Some tankers have been allowed to pass through the strait, including one associated with India and three associated with China. But overall traffic through the waterway is down more than 90% in March.
During the first 28 days of the war, a total of only 55 to 60 tankers have cleared the Strait of Hormuz, according to ship tracking website TankerTrackers.
Before the war, more than 100 ships per day made the passage, TankerTrackers said.
“This rise in gasoline spending could potentially dampen consumers’ ability to spend on ‘nice-to-have’ or discretionary categories,” the Bank of America economists recently wrote.
This year, the average U.S. household will spend an additional $740 on gas because of the jump in oil prices, according to economists from the Stanford Institute for Economic Policy Research.
“The consumer has already seen the sticker shock from rising gasoline prices and increased airline ticket prices from the rising cost of jet fuel,” longtime industry anaylst Andy Lipow said. “However, the full effects of the higher diesel prices has yet to be felt and that will flow through the economy over the next few months.”
As American consumers adjust to higher gas prices, oil dependent nations in Europe and Asia are already facing much more severe energy shocks. Inflation, oil and gas rationing and sharp pullbacks in economic growth estimates are impacting billions of people worldwide.
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