Key Takeaways
\nGas prices have risen about 11% over the past week, as the surge in oil prices sparked by the escalating conflict in the Middle East quickly feeds through to the costs that consumers face at the pump. An extended conflict that disrupts the global supply of oil could continue to push fuel prices higher, which would have an impact on overall inflation levels and weigh on economic activity.<\/p>\n
Drivers will likely experience more pain at the pump after a big jump in gas prices this week sparked by developments in the Middle East.\n<\/p>\n
The average cost of a gallon of regular gasoline, according to AAA, stands at $3.32, about 11% higher than a week ago, just before the U.S. and Israel launched attacks on Iran that have led to a broader armed conflict in the region. The rise in fuel prices follow a massive jump in oil prices amid concerns that supplies from the resource-rich region could be disrupted\n<\/p>\n
\u201cGasoline prices are going to keep going up in the U.S.,\u201d said Ryan Sweet, chief global economist at Oxford Economics, at a press event this week. \u201cWholesale gasoline prices, which lead retail by two weeks, signal that we\u2019re going to see higher prices, you and I will see higher prices, at the pump in the U.S. over the next couple of weeks.\u201d\n<\/p>\n
Why This Matters<\/p>\n
Even small increases at the pump can ripple through the economy by squeezing household budgets and reducing consumer spending, a key driver of U.S. growth. Sustained energy price increases can lift inflation, influence Federal Reserve interest-rate decisions, and shift market performance across sectors from airlines and retailers to oil producers.<\/p>\n
There’s Much More Room for Gas Prices to Rise <\/p>\n
The war in the Middle East has expanded in recent days, fueling concerns that it could last longer than some initially anticipated. President Donald Trump said earlier this week the conflict was expected last four to five weeks, though he opened up the possibility that it could last far longer. On Friday, he said only “unconditional surrender” from Iran will end the war.\n<\/p>\n
A prolonged conflict would continue to feed through to the prices consumers pay to fill up the tank.\n<\/p>\n
\u201cIt all depends on if there’s further escalation and oil prices rise from this point forward,\u201d Sweet said.\u201c Gasoline prices adjust very, very quickly.\u201d\n<\/p>\n
For every $10 increase in crude oil prices, expect to see around a 25 cent increase in pump prices, Sweet said.\u00a0<\/p>\n