US gas prices reach $4 per gallon due to the Iran war which has wreaked havoc on energy supplies worldwide
The U.S. average gas prices rose to $4 per gallon for the first time since more than three years on Monday, according to data from the price tracking service, GasBuddy. This was the largest monthly increase in decades.
Last August 2022, after the Russian invasion of Ukraine, was when we reached $4 per gallon. Analysts have called this price a psychological barrier to consumers. The price of crude oil, which is used to make gasoline, has also risen, as have the prices of many other goods since Iran banned most shipping through Strait of Hormuz.
Even before the rise in gasoline prices, U.S. household costs were increasing. The rising costs have created a political headache for President Donald Trump, and Republican Party lawmakers who are campaigning to win a thin majority in both chambers of the U.S. Congress during November's midterm elections.
Trump had promised to reduce energy prices and increase U.S. production of oil and natural gas. His second term so far has been characterized by volatile markets, geopolitical instability?and changing policies on issues like tariffs.
Since the U.S. and Israel launched their attack on Iran at the end February, the average U.S. retail gasoline price has risen by about $1.06 per gallon or 36%. GasBuddy's data from 2000 shows that the?monthly rise in retail gasoline prices for March was the highest ever.
Macquarie analysts stated last week that the price spike would impact "near-term" economic data if U.S. average gasoline prices surged past $4 per gallon. Analysts said that there should be a rise in inflation and an increase in nominal spending growth.
STEPS TO CONTROL PUMP PRICES ARE INEFECTIVE
As crude oil prices continue to rise, there are signs that the Middle East conflict is intensifying. U.S. crude oil futures reached $100 per barrel on Monday and remained near that level Tuesday. They are up about $33 since the U.S., Israel and Iran attacked Iran in February.
Analysts at Societe Generale said that oil prices are now expected to remain high for a longer period of time.
Trump's administration took steps to ease the rising energy prices, as the war dragged on. This included a waiver of the Jones Act Shipping Law for 60 days. The waiver allows foreign-flagged ships to temporarily move fuel, fertiliser and other goods from U.S. ports.
As part of an international coordinated effort to reduce oil prices, the U.S. Government has agreed to release oil from its Strategic Petroleum Reserve. Washington lifted anti-smog restrictions on seasonal gasoline blends in the U.S. last week.
Analysts say that the efforts have so far only helped to slow down the rise in fuel prices, and will be ineffective at lowering them as long as the Middle East war continues.
In a recent /Ipsos survey, 55% of respondents said that their household finances have been affected by higher gas prices at least "somewhat". 21% of those who?saw an impact said that their finances had been affected "a great deal."
The key issue isn't crude oil. Jeremy Siegel said that gasoline is the most visible cost in the economy. When the price increases, it affects consumers' psychology. Even if the broader effects of the economy are more balanced than headlines, it is important to know that.
(source: Reuters)
