Fuel price hike hits Americans' pocketbooks

Fuel price hike hits Americans’ pocketbooks

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. 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. 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.”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.”

© The Hill

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