Gas prices see biggest single-day spike in 3 years as Iran war jolts market
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Gasoline prices are jumping as oil prices spike following the U.S. and Israel strikes on Iran, reflecting market fears of extended geopolitical upheaval.
Why it matters: Americans use about 370 million gallons of gas per day, so price increases have an immediate effect on their pocketbook and mood about the economy.
Zoom in: The national average price of unleaded gas hit $3.11 per gallon on Tuesday, up 11 cents overnight, according to AAA.
- It was the biggest single-day spike since March 4, 2022, according to GasBuddy analyst Patrick De Haan.
- And it marks its highest point since Oct. 9, according to data supplied to Axios by the Oil Price Information Service.
Between the lines: Tom Kloza, a longtime oil analyst now working for Gulf Oil, tells Axios that he expects the national average price to reach a high of $3.25 to $3.50 in the coming weeks.
- Prices will jump even higher in the western U.S., he predicts.
- That stems from a sudden increase in petroleum prices as traders fear disruption in crude supplies from the Middle East. The price of West Texas Intermediate crude is up about $8 per barrel since the attacks began.
Follow the money: "That moves very quickly to the pump," Kloza says. "They will rocket higher when they're moving on geopolitics like this."
- Gas stations can change prices multiple times a week. Operating on thin margins, they typically price based on what their next fuel shipment will cost — not what they paid for what's already in their tanks.
By the numbers: As a general rule of thumb, every $1 increase in a barrel of oil translates into a 2.5 cent increase in gas prices, Kloza says.
- The oil price spike will also lead to increases in diesel, jet fuel, heating oil and natural gas prices, likely increasing the cost of shipping, airline tickets and home heat, Kloza adds.
Reality check: Even $3.50 per gallon gasoline is not devastating to the economy and is unlikely to lead to a significant change in purchasing behavior, as Americans have dealt with much worse spikes in the past.
- The record average national price of gas is $5.02 on June 14, 2022, as the world grappled with a bout of inflation and the effects of the recently ignited Russia-Ukraine war.
- Plus, U.S. supplies of gasoline are in good shape — and American oil companies could benefit from price increases, leading to higher profits and more oilfield jobs.
Context: Kloza also notes that prices were already on the rise as gas stations prep for the traditional annual switch from winter blend gasoline to more expensive summer fuel.
- "I don't think we're looking at apocalyptic moves for gasoline," Kloza says. "Now, I say that and everything's changing very quickly."
Threat level: "Energy price shocks have historically been disruptive for households and businesses, and the latest edition, if sustained, would constitute another unhelpful inflation impulse," according to James McCann, senior economist at Edward Jones.
The bottom line: The ripple effects of the attacks on Iran are still unfolding.
