Oil prices soared in the wake of the U.S. and Israeli attacks on Iran over the weekend, and gasoline prices could rise almost immediately, experts say.
Already, U.S. crude oil prices were up 6% as of Monday morning. A prolonged conflict between the United States, Israel and Iran could disrupt oil supplies and push prices higher. Iran is the fourth largest oil producing country within OPEC.
The average price of unleaded gasoline in the U.S. is now $2.997 per gallon, up 2% from a week ago, according to AAA.
A $10 per barrel increase in oil prices could increase gasoline prices by about 25 cents per gallon, said Ken Medlock, senior director of Rice University’s Baker Institute Energy Research Center.
“When oil prices go up, gas prices go up as well,” Medlock said. Within a week, “everyone will be paying a little more than they are now.”
According to the Energy Information Administration, the largest component of the retail price of gasoline is the cost of crude oil. Medlock said the supply chain will “immediately begin how to pass on that cost.”
“If restrictions are put in place to allow oil to pass through the Strait of Hormuz, oil prices will inevitably rise. That will also spill over into gasoline prices,” he said.
The Strait of Hormuz, located in the Gulf between Oman and Iran, is considered one of the world’s important oil corridors. Analysts have warned that if the strait disruption continues, oil prices could rise above $100 a barrel.
Amy Myers Jaffe, director of New York University’s Energy, Climate Justice, and Sustainability Laboratory, said the full impact could be delayed somewhat because it takes six weeks for the crude oil to be processed, turned into gasoline, and shipped.
“But our experience has shown us that dealers tend to be quick to rise and slow to fall,” she says.
Rising gasoline prices have a negative impact on consumers’ household finances
Consumers could see prices go up at a time when many are already facing an affordability crisis.
The national average price for unleaded gasoline in the U.S. remains around $3 per gallon, but even small price increases can put a strain on household budgets.
U.S. gasoline futures prices rose as much as 9.1% on Monday to $2.496 a gallon, the highest since July 2024. Although this is the price gasoline sellers pay in the spot market, not the price at the pump, the increase reflects what happens to consumers, Jaffe said.
For many Americans, paying more for gas is especially difficult because purchasing fuel is typically not a discretionary expense.
“It’s especially tough for low-income households who spend a lot of their budget on gas,” said Mark Zandi, Moody’s chief economist. “That’s a group that’s already under a lot of economic pressure.”
Furthermore, Zandi said, “Higher gasoline prices will have a huge impact because they will hurt consumer sentiment.” “It affects their ability and willingness to spend, and it weighs on the economy.”
Zandi calculated Monday that if the price of a gallon of gasoline continued to rise by 1 cent, it would increase spending on gasoline by nearly $1.4 billion over a year.
Even if you don’t drive, it’s almost impossible to avoid the effects of rising gas prices.
Other research has shown that companies that perceive increased fuel costs may pass on at least some, if not all, of those costs to consumers in additional fees or price increases.
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