Gas price surge over Iran hits Americans already struggling with affordability

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Iran’s New Leader Mojtaba Khamenei Vows To Keep Vital Oil Trade Route Closed | 12:30 REPORT

Iran’s New Leader Mojtaba Khamenei Vows To Keep Vital Oil Trade Route Closed | 12:30 REPORT

High fuel prices caused by the conflict in Iran threaten to worsen affordability issues that ordinary Americans face — and some economists are warning that a prolonged conflict could pull the U.S. into a recession.

Oil prices have jumped in the wake of U.S. attacks on Iran. International benchmark Brent crude was trading at about $101 dollars per barrel as of Thursday afternoon, while U.S. benchmark West Texas Intermediate crude was trading at $96 per barrel. That’s up from about $73 and $67, respectively, before the start of the conflict.

Gasoline prices, which are largely dependent on oil costs, were up too. The average U.S. gas price was about $3.60 per gallon Thursday, up from $2.94 a month prior.

“The average person’s budget is very tight. Low- and moderate-income families have very little discretionary income, so if their cost of gasoline goes up $50 a month, that’s not affordable, then they have to sacrifice something else,” said Mark Wolfe, executive director of the National Energy Assistance Directors Association.

Wolfe estimated that if oil is trading at $78 per barrel, the average household spends $163 on gas per month. If that number goes up to $90 a barrel, the average household pays $180. At $100 per barrel, the average household is paying $198. 

When the price of gas goes up, he said, “they cut back on medicine … families will cut back on summer vacations. They’ll drive less.”

“They’ll put off repairs to their home. They’ll do whatever they can because they have to buy gasoline. It’s essential,” Wolfe added. 

“Most low-income families don’t have savings,” he said. “They will run up credit card debt, they will borrow from payday lenders. Those are the kinds of actions to take when people can’t pay basic expenses.”

Massachusetts Institute of Technology professor Christopher Knittel warned that a slowdown in economic activity related to the high prices could push the economy toward a downturn.

“The typical driver in the U.S. consumes about 600 gallons of fuel a year. So, if prices go up by a dollar, then I’m spending 600 extra dollars on gasoline. That means I have 600 [fewer] dollars to spend on everything else, and that leads to less economic activity, and that can potentially push us into a recession,” Knittel said. 

He said that if the conflict “ends tomorrow, then I think we’ll be in fine shape. But if this continues, for a month, two months or even longer, then I think we’re certainly above the 50 percent chance of a recession.”

Knittel added that a recession could entail “a lot less spending throughout the economy,” higher unemployment and potentially a drop in stock prices.

An analysis published Thursday by Goldman Sachs predicts that Brent crude could average $98 per barrel in March and April, up 40 percent from their 2025 average, though it says that a high-disruption scenario could see it averaging $110 per barrel.

The firm said that a sustained 10 percent increase in oil prices would boost overall inflation by 0.2 percentage points and lower gross domestic product growth by 0.1 percentage points.

In their own research note Thursday, Oxford Economics researchers wrote that in their worst-case scenario, oil could be at about $140 per barrel for two months. Their analysis projected that this could trigger a mild recession.

Meanwhile, the economic impacts could go beyond just gasoline, as petroleum also makes up diesel and jet fuel.

“Diesel fuels everything,” David Doherty, head of natural resources research at BloombergNEF, told The Hill on Monday, noting that it’s used to deliver goods. “That directly hits inflation, and it can hit inflation pretty quickly.”

However, Doherty also noted that for consumers, the issue may not be as noticeable.

“If I’m getting a delivery from Amazon, I’m getting one or two packages, not a full truck,” he said. 

He added that this means it can have a “bit of a muted impact because it’s spread out over different and more end users … but it will absolutely impact the bottom line of companies.”

Meanwhile, Wolfe pointed out that products ranging from polyester to fertilizer contain oil and could be impacted by increased energy prices.

“All the things that you don’t think of as being subject to petroleum, in fact, are, and that affects ordinary families,” Wolfe said. 

The Trump administration has sought to defend the high prices, arguing that they will only be temporary. Both the president and other administration leaders have called the increased costs a “small price to pay” to achieve the nation’s goals in Iran.

“Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace,” President Trump said in a social media post on Sunday night.

Energy Secretary Chris Wright also described rising costs as a “very small price to pay” to achieve the nation’s objectives.

And on Thursday, Trump argued that the U.S. benefits when prices go up since U.S. companies are major energy producers.

“The United States is the largest Oil Producer in the World, by far, so when oil prices go up, we make a lot of money,” Trump said in a post on Truth Social.

On Wednesday, Wolfe criticized the “small price” comments.

“For upper-income families, it is a small price to pay. It’s a very small part of their budget. For lower-income families, it’s significant. It makes a real difference in their ability to buy food, to buy medicine, to pay rent,” he told The Hill.

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