Gas prices could hit $4 in the next month as war in Iran escalates
Gas prices, which rose by about $0.50 last week, could rise to $4 per gallon in the coming weeks as tanker traffic in the Strait of Hormuz has virtually stopped.
On Sunday evening, the price of oil (CL=F) exceeded $110 per barrel as traffic on the main transportation route, which usually supplies one-fifth of the world’s oil supply, came to a halt due to threats of attacks from Iran.
Every $10 increase in crude oil prices represents an increase of $0.25 at the pump for Americans.
“I believe there is roughly an 80% chance that the national average gas price will reach $4 per gallon in the next month or sooner,” GasBuddy Patrick De Haan said. wrote Sunday evening. “In the near term, the national average of $3.45 per gallon could rise to roughly $3.75-$3.95 this week alone.”
Read more: How do oil price shocks affect your wallet, from gasoline to groceries?
If prices exceed $4 per gallon, it will be the first time since August 2022 that Americans will encounter such staggering prices at the pump. A week ago the national average price per gallon was $2.99; currently $3.47, according to AAA.
To put the rapid increase into context, Americans could collectively spend an average of $187 million more per day at the pump than last week.
Diesel costs are rising even faster. De Haan believes there is an 85% chance that the cost of diesel will reach $5 per gallon nationally this week for the first time since Dec. 7, 2022.
The current national average for diesel is $4.66, up from $3.77 a week ago, which has broader implications for consumers. As the conflict continues, the high cost of transporting goods drives up prices for Americans at the store.
This will affect everything from foodstuffs to clothing to construction materials, with the majority of goods transported via cargo in the US.
The potential energy crisis has raised stagflation concerns on Wall Street as oil prices soared and labor data came in worse than the U.S. Bureau of Labor Statistics expected.
“Concerns about stagflation are growing in the United States,” JPMorgan analysts said in a note to clients Monday.
deVere Group CEO Nigel Green also said the “toxic combination” of rising inflation and slowing economic growth was a “very real possibility”.
“Oil is the flashpoint,” Green wrote. “With energy prices rising so fast, inflation is accelerating almost everywhere. Businesses are facing higher costs, households are facing higher bills, and growth is also being squeezed.”
