Gasoline prices in the U.S. continued climbing on Monday after the U.S.-Israeli war with Iran temporarily pushed oil prices above $100 per barrel, the highest since 2022.
The average national cost of gas is now $3.48 per gallon, up 48 cents since last week and 58 cents from a month ago, according to data from AAA. That remains considerably lower than during the pandemic, when a disruption in oil supplies pushed the cost of regular gas up to $5.02.
Prices are currently highest in California, where drivers were paying an average of $5.20 per gallon on Monday morning, and in Washington state, where gas hit $4.63 per gallon. Kansas has the country’s lowest average price, at $2.92 for a gallon of regular.
West Texas Intermediate (WTI), the U.S. benchmark, and Brent crude, the international benchmark, both jumped around 30% over the weekend to nearly $120 a barrel. On Monday, WTI receded to $93.39, while Brent fell to $98.72.
The price of diesel, which has a tighter inventory than regular gas, has also skyrocketed, rising nearly 89 cents over the last week to $4.66 a gallon.
Fuel prices have jumped as the Iran war disrupts the flow of oil through the Strait of Hormuz, the key channel that connects the Persian Gulf to the Gulf of Oman and the Arabian Sea.
JPMorgan says high gas prices could persist
Even if oil production and distribution resume relatively quickly, U.S. gas prices could stay elevated until the fall due to higher seasonal demand this summer, David Kelly, chief global strategist at J.P. Morgan Asset Management, said in a note to clients Monday.
Ian Bremmer, founder of Eurasia Group, a global political risk research and consulting firm, also told CBS News that he expects average gas prices to reach $4 in the coming week and to hover around that level.
“Americans feel the impact of higher gas prices every week when they fill their car tank,” he said. “It’s something everyone sees and feels that’s meaningful and will play through to other prices as well.”
“With additional attacks across the Middle East over the weekend pushing oil above $100 per barrel for the first time in years, fuel markets are now rapidly recalibrating to the risk of prolonged disruption to global supply flows,” GasBuddy petroleum analyst Patrick De Haan said in a report Monday.
In many states, gas prices could rise an additional 20 to 50 cents per gallon this week, De Haan also predicted.
The cost of oil accounts for roughly 60% of the price of gas, according to industry figures, with taxes, local fees and other factors also affecting prices at the pump.
All eyes on Hormuz
The Eurasia Group forecast in a report on Monday that the price of crude will remain elevated — potentially reaching above $120 per barrel — until security in the Strait of Hormuz improves and tanker traffic resumes.
David Oxley, chief climate and commodities economist at Capital Economics, said in a note to investors: “From an energy market perspective, the impact on energy flows from the Middle East will be dictated by two key variables: a) how long the Strait of Hormuz remains closed, and; b) the extent to which potential damage to energy infrastructure in the region constrains energy exports in the future, even when/if shipping through the strait resumes.”
To alleviate oil supply pressures, President Trump last week announced that the U.S. International Development Finance Corporation will insure ships sailing through the Persian Gulf. The government agency said it will insure losses “up to approximately $20 billion on a rolling basis,” although it remains unclear when it will start extending the maritime reinsurance.
Mr. Trump said in a social media post on Sunday that he expects only a “short-term” increase in oil costs and that the rise is “a very small price to pay for U.S.A., and World, Safety and Peace.”
Renewed inflation pressures
Rising gas prices will hit lower-income households, which spend a large share of their incomes on essentials like gasoline, the hardest, according to Bernard Yaros, lead U.S. economist at Oxford Economics.
“Given how low the elasticity of demand is for gasoline, the lower-end of the income distribution will cut back even more on discretionary goods and services outside of the essentials,” he told CBS News. “This will lead to a reduction in savings, more credit being taken out in consumer loans, and more pockets of stress, especially in the form of higher delinquency rates among the most vulnerable segment of the population.”
Yaros expects U.S. inflation to rise above 3%, noting there will be a “direct pass-through of higher oil prices to energy prices.”
But higher-income Americans are expected to buoy consumer spending, mitigating the impact of the war on the overall economy, Yaros noted. “We won’t have a consumer spending recession because the upper-income households are still doing just fine. They account for a disproportionate share of overall consumption, and as long as they hold it together, it would be premature to send any red flares.”
