Iran War Adds $100 Billion to Fuel Bills
Iran War Adds $100 Billion to Fuel Bills
The News
American drivers and businesses have paid an extra $100 billion for gasoline and diesel since the US-Israel war on Iran began on Feb. 28, according to a real-time tracker run by Brown University's Watson Institute for International and Public Affairs.
Axios reported Monday morning that the tally is rising by roughly another $1 million every two minutes.
Spread across an estimated 131 million US households, the added cost works out to about $763 per household in six months, Al Jazeera reported, citing the same tracker.
The Numbers
Gasoline has climbed 39 percent since the war started, from about $2.98 to $4.15 a gallon. Diesel has jumped more than 60 percent, from $3.67 to $5.90 a gallon.
Texas has absorbed the largest share of the hit, with consumers there paying around $11 billion in extra gas and diesel costs since late February, per the tracker.
Pump prices are highest on the West Coast. AAA puts California's average at $5.85 a gallon, followed by Washington ($5.51), Hawaii ($5.39), Alaska ($5.03) and Oregon ($5.01). Indiana is cheapest at $3.43.
Timeline
The US-Israel war on Iran begins. President Trump says at the outset that the fighting will last four to five weeks.
After the attacks, Iran declares the Strait of Hormuz its own to control and strikes vessels trying to enter or exit the Persian Gulf, choking off 13 million barrels a day of oil supply, CNN reported.
The United Arab Emirates announces it is leaving OPEC, opening a fight over the cartel's future.
Iran switches tactics, forming the Persian Gulf Strait Authority and requiring transiting ships to register, follow an authorized path and pay a toll.
Iran signs a memorandum of understanding with the United States and agrees to stop charging tolls for 60 days, but keeps attacking ships that do not register.
The Brown tracker passes $100 billion in added US consumer energy costs, in the war's sixth month, with no diplomatic breakthrough in sight.
Reactions
Trump has dismissed concerns about fuel costs, telling Reuters: "If they rise, they rise." He has accused oil companies of "price gouging," Al Jazeera reported.
Axios reported that the president insists Americans are willing to pay higher prices to keep Iran from getting a nuclear weapon.
The war is unpopular at home. A majority of Americans blame Trump for the rise in fuel prices, according to Al Jazeera.
"It seems likely that Iran will emerge from the war with a stronger position over control of the strait, and that will force countries reliant on Middle Eastern crude to adapt," Baird investment strategist Ross Mayfield told CNN. "Hormuz closure went from a hypothetical tail risk to a demonstrated and effective tactic."
JPMorgan commodities chief Natasha Kaneva told CNN that the demand hit may stick: "History suggests that past oil shocks often left lasting declines in gasoline demand, and this episode may prove no different."
What's Next
Axios reported there is still a great deal of uncertainty over how much oil is actually getting out of the Middle East, which will drive fuel prices in the coming weeks and months. Its bottom line: consumers face a longer stretch of high fuel prices than anyone expected when the war began.
CNN reported the cost-of-living increases should eventually reverse if the United States and Iran reach a ceasefire — but that other changes will not. Analysts expect any settlement could let Iran charge tolls for safe passage, which Kaneva said could add about $1 to the price of a barrel under a fee structure like Turkey's.
Watch OPEC. Iraq, the bloc's second-largest producer, has signaled it will weigh leaving if production targets do not rise sharply; its oil minister told Bloomberg the country wants clearance for a record 5 million barrels a day, with a long-term aim of up to 7 million.
More
The pain is not confined to the pump. CNN reported mortgage rates are rising toward 7 percent and companies are tacking shipping surcharges onto freight to cover record diesel costs.
Food is next in line. Al Jazeera noted oil and gas touch nearly every stage of the food chain — fertilizer, tractor fuel, refrigeration, plastic packaging and truck fuel — with those costs stacking up before groceries reach the shelf.
The world adapted faster than the oil industry expected. Of the 1.9 billion barrels of Middle Eastern crude lost during the war, 800 million were absorbed simply by people and businesses using less oil, according to JPMorgan. Brazil added 800,000 barrels a day of output, Guyana 300,000, Canada 200,000 and Norway 150,000, while the United States now pumps 900,000 barrels a day more than a year ago.
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