Gasoline prices rose nearly $0.50 last week and may now rise to $4 per gallon in the coming weeks, as tanker traffic through the Strait of Hormuz has virtually stopped.
On Sunday evening, the price of oil (CL=F) crossed $110 per barrel as traffic through the key transportation route, which typically handles one-fifth of the world’s oil, was halted amid threats of attacks by Iran.
Every $10 increase in crude oil prices represents a $0.25 increase at the pump for Americans.
“I believe there is about an 80% chance that the national average gasoline price will hit $4 per gallon in the next month or sooner,” GasBuddy Patrick De Haan wrote Sunday evening. “In the immediate term, the national average of $3.45 per gallon could rise to around $3.75-$3.95 this week alone.”
Read more: How fuel prices are hitting your wallet, from gas to groceries
If prices exceed $4 per gallon, it will be the first time since August 2022 that Americans have faced such a shock price at the pump. A week ago, the national average price was $2.99 per gallon; Now, it’s $3.47, according to AAA.
To put the sharp increase in context, Americans could collectively spend an average of $187 million more per day at the pump than last week.
Diesel prices are rising even faster. DeHaan believes there is an 85% chance that diesel prices will hit $5 nationally this week starting December 7, 2022.
The current national average for diesel is $4.66, up from $3.77 a week ago, which has broad implications for consumers. As the conflict continues, the higher cost of shipping goods raises prices for Americans at the store.
This will affect everything from food to clothing to construction materials, as most goods in the United States are transported by freight.
Now, the potential energy crisis has raised inflation concerns on Wall Street, as oil prices rise and employment data from the US Bureau of Labor Statistics comes in worse than expected.
“Concerns about inflation in the U.S. are rising,” JPMorgan analysts wrote in a note to clients on Monday.
Nigel Green, chief executive of De Vere Group, also noted that this “toxic combination” of rising inflation and slowing economic growth is a “very real possibility”.
“Oil is a flash point,” Greene wrote. “Energy prices are rising rapidly, inflation is accelerating almost everywhere. Businesses are facing higher costs, households are facing higher bills, and growth is slowing at the same time.”
