Gas prices rise in Minnesota as oil spikes after Iran strikes
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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.
State of the pumps: The average price of unleaded gas in Minnesota hit $3.07 per gallon Wednesday, according to AAA, up 29 cents from a week ago.
- Prices in the metro were trending slightly higher, data from AAA and GasBuddy show.
What we're watching: 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.
- His prediction stems from a sudden increase in petroleum prices as traders fear disruption in crude supplies from the Middle East.
Follow the money: "That moves very quickly to the pump," Kloza says. "They will rocket higher when they're moving on geopolitics like this."
Between the lines: 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.
Zoom out: 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.
- There could be ripple effects on prices for goods ranging from cookware to fertilizer.
What they're saying: "Energy price shocks have historically been disruptive for households and businesses," James McCann, senior economist at Edward Jones, says. "The latest edition, if sustained, would constitute another unhelpful inflation impulse."
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.
Worth noting: Prices were already on the rise as gas stations prep for the annual switch from winter-blend gasoline to more expensive summer fuel, Kloza says.
The bottom line: The ripple effects of the attacks on Iran are still unfolding.