U.S. gas prices hit $4 per gallon as fuel prices surge due to Iran war

U.S. gasoline prices have surged above $4 per gallon for the first time in more than three years, as the oil supply shock triggered by the Middle East war rapidly drives up costs for families.

Prices at the pump hit a nationwide average of $4.018, the highest level since August 2022 when Russia’s war against Ukraine shook energy markets, the travel association AAA said. Gas prices have soared more than 30% since the U.S. and Israel attacked Iran in late February, according to AAA data.

“We foresee potential for a disruption to the American fuel supply,” Lee Zeldin, head of the Environmental Protection Agency, told reporters at S&P Global’s CERAWeek conference in Houston last week. The EPA is temporarily lifting some regulations to increase gas supplies in an effort to ease prices.

Vice President JD Vance told consumers they face “a rough road ahead” on gas prices in the coming weeks. Vance promised that the spike is temporary and prices will fall after the war has ended.

“We’ve got a problem, we know we have a problem, and we’re doing everything we can to address it,” the vice president said at an event in Auburn Hills, Michigan on March 18.

Oil prices have surged more than 50% since the war began. Brent prices, the international benchmark, are on pace for a record monthly gain dating back to the creation of the futures contract in 1988. U.S. crude oil is heading to its biggest gain in a single month since 2020.

The average monthly gas price in March is expected to be 25% higher compared with February, said David Doyle, head of economics at Macquarie Group. This would mark the largest monthly increase dating back to October 1990, Doyle told clients in a March 25 note.

Diesel prices surge

Diesel prices, meanwhile, crossed $5 per gallon mark on March 17, and are currently more than 40% higher than they were before the conflict. This has broad implications for the U.S. economy. The fuel is used by trucks and freight trains that transport goods to market.

“The consumer has already seen the sticker shock from rising gasoline prices and increased airline ticket prices from the rising cost of jet fuel,” Andy Lipow, president of Lipow Oil Associates, told clients in a March 20 note.

“However, the full effects of the higher diesel prices has yet to be felt and that will flow through the economy over the next few months,” Lipow said.

Consumers could see the impact by April through higher prices at the supermarket and for their online orders, said Patrick De Haan, head of petroleum analysis at GasBuddy. “This is really quickly going to ignite additional inflation,” the analyst said on March 20.

Energy Secretary Chris Wright told CNBC last week that the administration has plans to increase the diesel supply.

“We do have some ideas on diesel, that we can bring extra diesel to the marketplace,” Wright told CNBC’s Brian Sullivan in an interview in Houston. “I think we’ll see that happen before too long.”

Oil prices have surged because tanker traffic through the…