Oil prices spiked after the U.S. and Israel attacked Iran over the weekend, threatening an almost immediate jump in gasoline prices as well, experts say.
Already, U.S. crude prices gained 6% as of Monday morning. A prolonged U.S.-Israel conflict with Iran could disrupt crude oil supplies and push prices even higher. Iran is the fourth-largest oil producer in OPEC.
The average price of unleaded gasoline in the U.S. is currently $2.997 a gallon, up 2% from a week ago, according to AAA.
If the price of oil goes up by $10 a barrel, the price of gasoline could rise by about 25 cents a gallon, according to Ken Medlock, senior director at the Center for Energy Studies at Rice University’s Baker Institute.
“If the price of oil goes up, the price of gas goes up in lockstep,” Medlock said. Within a week, “everyone is going to be paying a little more than they are right now.”
The largest component of the retail price of gasoline is the cost of crude oil, according to the Energy Information Administration. The supply chain “immediately kick-starts how that cost is passed along,” Medlock said.
“If we see restrictions through the Strait of Hormuz… inevitably we will see the price of crude oil jump,” he said, “that will trickle through to the price of gasoline.”
Located in the gulf between Oman and Iran, the Strait of Hormuz is considered one of the world’s key oil corridors. Analysts have also warned that a prolonged disruption of the Strait of Hormuz could push oil prices above $100 per barrel.
It takes six weeks for crude oil to be processed and turned into gasoline for delivery, so the full impact could be somewhat delayed, said Amy Myers Jaffe, director of the Energy, Climate Justice and Sustainability Lab at New York University.
“But as we know from the past, dealers tend to be fast to go up and slow to come down,” she said.
Higher gas prices hurt consumer budgets
Consumers are likely to see higher prices at the pump at a time when many are already facing an affordability crisis.
Although the national average price of unleaded gasoline in the U.S. is still about $3 a gallon, even small price increases can strain household budgets.
U.S. gasoline futures surged by as much as 9.1% to $2.496 a gallon Monday, their highest since July 2024. This is the price that sellers of gasoline pay on the spot market, not the price at the pump, but the rise is reflective of what could be in store for consumers, Jaffe said.
Paying more for gas is especially difficult for many Americans, since buying fuel is not typically a discretionary expense.
“It’s particularly hard on lower-income households that spend a higher share of the budget on gas,” said Mark Zandi, chief economist at Moody’s. “That’s the group that’s already under a lot of financial pressure.”
Further, “higher gasoline prices have an outsized impact because it hurts consumer sentiment,” Zandi said. “That affects their ability and willingness to spend, and that weighs on the economy.”
Every sustained one-cent increase in the cost of a gallon of gasoline increases spending on gasoline by nearly $1.4 billion over the course of a year, according to Zandi’s calculations on Monday.
Even if you don’t drive, the impact of higher gas prices is nearly impossible to avoid.
Companies that see their fuel costs increase may pass at least some, if not all, of that expense on to consumers, either as a surcharge or price hike, other research shows.
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