US gasoline tops $4 for first time since 2022 on Iran war
U.S. gasoline topped $4 a gallon for the first time since August 2022, one of the most high-profile reminders to date that even the world’s largest economy is feeling the impact of a deepening conflict in the Middle East.
The nationwide average retail price for regular unleaded gasoline rose to $4.018 a gallon on Monday, according to the American Automobile Association. Prices have surged more than $1 since the start of the war, up from $2.98 on the day before the US and Israel began attacks against Iran.
The war against the Islamic Republic has created havoc in one of the world’s most important oil- and gas-producing regions and has all but closed the Strait of Hormuz, a vital energy thoroughfare.
US crude prices settled above $100 a barrel on Monday for the first time since the aftermath of Russia’s invasion of Ukraine. But the rally has been more acute in refined products that consumers use. Already, retail diesel has risen above $5.45 a gallon, a key pain point and major inflationary threat.
Surges in pump prices are a major political risk for President Donald Trump’s White House in a midterm-election year. In addition, the gains stand to complicate the challenge for the Federal Reserve, as Chair Jerome Powell and policymakers seek to keep price rises in check while sustaining employment.
Trump has given a series of conflicting messages about the war in recent days, mixing threats of escalation with remarks that suggests talks with Tehran are progressing.
Costlier US fuel is also an echo of far harsher price surges and shortages being felt around the world since the outbreak of the war. India is chronically short of cooking gas, gasoline in Japan hit a record earlier this month, and fuel stations have run dry in Australia.
The White House has unleashed a slew of measures to try to tamp down prices at home. These include a 60-day waiver of the Jones Act, which allows overseas-flagged vessels to carry fuel between US ports, as well as a waiver for a fifth year to exempt cheaper E15 gasoline from summer volatility requirements. Neither move has meaningfully brought down fuel prices so far.
For every $1 rise in pump prices, consumer sentiment as measured in the University of Michigan’s survey goes down by 4.5 index points or more, even after factoring in other impacts, according to research from Ryan Cummings and Neale Mahoney at Stanford University’s Institute for Economic Policy Research.
That “is roughly saying, people feel 5% worse about the economy for every dollar that prices increase at the pump,” said Cummings, the institute’s chief of staff, and a former staff economist in the Biden administration’s Council of Economic Advisers from 2021 to 2023, who worked on gasoline policy.