How Much Will Gas Prices Go Up After Iran Conflict?
On Saturday night, the United States dropped bombs on three nuclear sites in Iran. By this morning, West Texas Intermediate (WTI) crude oil had jumped to over $73 per barrel, sparking concerns that the intensifying conflict in the Middle East could send prices above $100 per barrel. But how exactly would that energy outlook impact gas prices for drivers in the United States?
It’s complicated, but the short answer is you should brace for a slow but steady rise in gas prices over the summer, with some risk of sudden spikes depending on how Iran responds to the recent attacks from Israel and the United States.
Here’s what you need to know as you budget for this summer, plus some gas saving tips to help you keep costs down no matter what happens in the months ahead.
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Gas prices are on the rise this summer
(Image credit: Getty Images)
The national average gas price in the United States is $3.22 per gallon, according to the AAA. That’s up about eight cents over last week, but still about 22 cents lower than where it was this same day last year. While what you pay at the pump tends to rise every summer, that effect has been somewhat muted this year because supply currently outweighs demand.
But, between summer travel driving increased demand and the potential for the conflict with Iran to push oil prices higher, some forecasts expect gas prices to rise between seven and 15 cents per gallon this week.
Depending on how Iran responds to this weekend’s attack by the United States, drivers could see an even more painful price hike at the pump. The main concern is whether or not Iran chooses to close the Strait of Hormuz, a narrow waterway that about 20% of the global oil supply must pass through on its way to being exported to countries around the world.
The Iranian parliament has already approved plans to close the key shipping lane, but, according to reporting by Al Jazeera, the bill calling for its closure has not yet been ratified. If it does move ahead with the plan, closing the Strait of Hormuz could push crude oil prices above $100 per barrel – and the longer it remains closed, the longer those prices could remain elevated.
According to the U.S. Energy Information Administration, the price of crude oil accounts for over half the price you pay at the pump. So, oil prices jumping from around $60 to over $100 per barrel would result in a dramatic increase in gas prices as well. But that price increase would only last as long as oil prices remain elevated.
Tips for keeping costs at the pump down
Even without any response at all from Iran, gas prices are still likely to rise slowly but steadily over the rest of the summer, as typical seasonal trends in demand drive prices up.
Your best bet as a consumer is to take advantage of as many discounts as you can to keep the price you pay at the pump as low as possible, regardless of how geopolitical events unfold.
One of the best ways to keep prices down is to take advantage of a shopping membership that offers gas discounts to help you save on gas. Warehouse clubs like Costco or Sam’s Club are well-known for offering gas that’s typically between five and 25 cents per gallon below the local average.
With Costco, if you combine that Costco membership with the store’s branded cash back credit card, you can earn 5% cash back on Costco gas, helping you save even more at the pump.
If you don’t live close enough to a Costco or Sam’s Club to make that your primary gas station, Amazon and Walmart both offer gas discount perks as well – giving members 10 cents off per gallon at gas stations in their networks.
Just make sure to do the math on how much any membership you get costs and how much you’d save by joining. If you don’t drive often and don’t have any use for the other perks that the membership offers, it might be cheaper to just pay the higher prices at the pump whenever you do need to fill up. Just use a cash back or travel rewards credit card when you do so you can earn elevated rewards on those higher prices.
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