The average price of a liter of gasoline hit $4 on Tuesday for the first time since mid-2022, as the cost of oil increased due to the war in Iran.
In the month since the United States and Israel attacked Iran, the price of unleaded gas has risen by more than a dollar a liter. As of Tuesday morning, the average price across the country was $4.02 per liter, the AAA auto club said.
It’s not just retail fuel. Diesel fuel used to power commercial trucks, farm equipment and public transportation has risen to $5.45 a gallon, more than $1.80 more than last year.
Driving that is the rising cost of crude oil worldwide. US West Texas Intermediate (WTI) crude has risen more than 50% since the war began in Feb. 28, while Brent, the international benchmark, saw a jump of almost 60%.
On Monday, US crude oil settled above $100 a barrel for the first time since Russia’s full-scale invasion of Ukraine in 2022. Brent crude oil is poised to see its biggest one-month increase in history.
Oil prices have started to rise ahead of the Iran war, fueled by fears that conflict is imminent. Since the start of the year, the cost of US crude oil has risen more than 80% and Brent is up almost 90%.
In response to US and Israeli strikes, Iran has effectively blocked shipping through the Strait of Hormuz, a critical channel along its southern coast. Tehran has also attacked its Gulf Arab neighbors, which are major oil producers.
In general, more than 20% of the world’s oil travels through waterways. But Iran has also threatened to attack ships if they pass through the strait without permission or if they ally with the US or Israel. Many tankers were hit.
As a result, many tankers are stuck in the Persian Gulf, unable to deliver their products to the market.
Other tankers have been allowed to go through the crisis, including one related to India and three related to China. But overall traffic on the waterway dropped by more than 90% in March.
In the first 28 days of the war, a total of 55 to 60 tankers have cleared the Strait of Hormuz, according to the ship-tracking website TankerTrackers.
Before the war, more than 100 ships a day made the passage, it said.
“These increases in fuel spending may dampen consumers’ ability to spend on ‘nice-to-haves’ or the right brands,” Bank of America economists wrote recently.
This year, the average US household will spend an extra $740 on electricity because of higher oil prices, according to economists at the Stanford Institute for Economic Policy Research.
“The consumer has already experienced the sticker shock of higher fuel prices and higher airfares from the rising cost of jet fuel,” said longtime industry analyst Andy Lipow. “However, the full effects of diesel prices are yet to be seen and will trickle down to the economy over the next few months.”
As American consumers adjust to higher fuel prices, oil-dependent countries in Europe and Asia are already facing a more severe energy shock. Inflation, oil and gas prices and sharp declines in economic growth rates are affecting billions of people around the world.
