- U.S. average gas price jumps to $3.85 following renewed Middle East hostilities
- Prices had been heading down since start of peace talks late last month
- Industry watchers predict high consumer prices will persist, even if peace efforts are successful
Consumer gas prices are headed up again as the U.S. launched fresh strikes against Iran Thursday, following President Donald Trump’s comments at a NATO summit the previous day that the ceasefire was “over” after Iran attacked vessels in the critical Strait of Hormuz shipping passage.
Consumer gas prices across the U.S. jumped by 5 cents a gallon on Thursday per AAA tracking, reversing a trend of reductions since the restart of peace talks late last month. The average price of a gallon of regular was $3.85 on Thursday, still well below the $4.16 national average of a month ago but up from $3.16 per gallon this time last year.
Robin Brooks, senior fellow in Economic Studies with the Brookings Institution, noted in a Wednesday interview with Marketplace that before the U.S. and Israel launched attacks against Iran in late February, U.S. drivers were paying an average of about $3 per gallon. That national average would later climb to about $4.50 before inching down as tensions eased. Brooks said prices are set to head back up amid renewed attacks by both the U.S. and Iran, elevating pressures on U.S. household budgets.
“Obviously this is going to push the prices at the pump back up,” Brooks said. “So it’s not good for the U.S. consumer and it’s going to feed resentment and fears over affordability.”
If the Iran conflict should return to a full-blown “hot war,” drivers should expect prices to head back toward recent highs.
“I think the shock is basically the same,” Brooks said. “If you think back to the worst moments that we’ve had (since the start of the Iran war), oil basically topped out around $125 – $126 per barrel. I think that’s the top that we’ll see now, if we really go back to a bad conflict again."
Utah drivers were facing average gas prices of $3.93 across the state on Thursday, according to AAA, up 7 cents per gallon from Wednesday and about 6 cents per gallon more than a week ago. While the current average price is well down from the $4.44 average from a month ago, it’s still well ahead of the statewide $3.32 per gallon average from this time last year.
While consumer gas prices showed a spike on Thursday, prices on oil futures eased a bit following Trump’s comments that peace talks could be set to renew.
International benchmark Brent Crude oil pricing was down just over 2% midday Thursday to $76.26 per barrel after Trump told reporters Wednesday evening that Iran had “called” requesting a renewal of peace talks.
“We have many ways we can win, but we’ve already won militarily,” Trump told reporters aboard Air Force One Wednesday evening, per a report from CNBC. “They have very little left, and they want to make a deal so badly. They called a little while ago. They want to make a deal so badly. I just don’t know if they’re worthy of making a deal. I don’t know that they’re going to honor the deal. That’s the problem.”
Ending Middle East hostilities may not bring price relief
A report from Reuters notes that even as oil shipping traffic through the Persian Gulf’s Strait of Hormuz has improved and wholesale prices have eased significantly, gasoline and diesel markets are signaling a supply crunch that could impact consumer prices for months.
“There’s just not enough refining capacity left globally to deal with all this,” Sparta Commodities analyst Neil Crosby told Reuters, adding high fuel prices could soon curb consumer demand.
William Stern, founder and CEO of San Diego-based business lender Cardiff, also believes recovering from the Iran war’s impacts on the global petroleum industry will be an extended journey.
“Don’t fall for the ‘snapback’ narrative,” Stern said. “The media sees a few tankers moving and calls it a recovery, but that’s a joke. We just went through the largest energy supply shock in history, you don’t just flip a switch to fix broken infrastructure and restart production that’s been down for months. U.S. inventories are still in the basement.
“We’re going to be feeling the aftershocks of this for another year, easily. Anyone telling you we’re back to normal is just reading headlines instead of looking at the logistics. We’re in a slow grind, not a V-shaped recovery.”