Americans have spent an estimated $107 billion more on gasoline and diesel since the Iran war began as oil prices above $100 a barrel push transportation costs higher and add pressure to household budgets and the broader economy.
By yourNEWS Media Newsroom
American consumers have absorbed an estimated $107 billion in additional gasoline and diesel expenses since fighting with Iran began in February, according to a Brown University analysis measuring the effect of sharply higher energy prices on households nationwide.
The Climate Solutions Lab at Brown University calculates that the added fuel burden has averaged more than $500 million per day since U.S. and Israeli military operations against Iran began Feb. 28, according to The Wall Street Journal. The estimate measures the difference between what Americans actually paid for gasoline and diesel and what researchers estimate they would have paid without the wartime energy shock.
The cumulative cost crossed $100 billion around Labor Day. Brown researchers estimated at that point that the average American household had paid more than $750 beyond what it otherwise would have spent on gasoline and diesel since the conflict began.
Researchers developed the Iran War Energy Cost Tracker by comparing actual retail fuel prices with a counterfactual price intended to estimate where prices would have been without the conflict.
The calculation starts with prewar prices and historical daily price movements. Researchers then compare that estimate with actual gasoline and diesel prices and multiply the difference by nationwide fuel consumption.
Brown uses retail price information from AAA, fuel consumption figures from the U.S. Energy Information Administration and household data from the Census Bureau in calculating the national and household burdens.
The methodology does have limitations.
The estimate does not fully account for drivers and businesses consuming less fuel because prices have increased. If Americans have responded to higher prices by driving less, postponing trips or reducing other fuel-dependent activity, the amount actually spent above the prewar trajectory could be lower than the tracker estimates.
Jeff Colgan, a Brown University professor and director of the Climate Solutions Lab, said reduced consumption itself represents another economic consequence.
“But in a way that is another cost of the war, people being forced off consumption they would otherwise have chosen,” Colgan said.
The increase has come as global oil markets face pressure from several directions simultaneously.
Commercial traffic through the Strait of Hormuz remains below levels recorded before the conflict. The narrow waterway is a major route for global petroleum shipments, making disruptions there capable of affecting prices well beyond the Middle East.
Iran-backed Houthi forces have also threatened tanker traffic on the western side of the Arabian Peninsula, creating additional uncertainty around alternative shipping routes.
Meanwhile, Ukrainian attacks have disrupted portions of Russia’s refining industry, tightening markets for refined petroleum products at the same time Middle Eastern supplies remain under pressure.
Those conditions pushed Brent crude futures to $108.75 a barrel at Tuesday’s close, a four-month high. Brent rose 2.9% during the session as traders responded to additional concerns about Middle Eastern supply routes.
The higher crude price eventually reaches consumers through gasoline, diesel and other petroleum products.
Diesel has become an especially significant part of the current energy shock because its economic role extends far beyond passenger vehicles.
Trucks that move goods across the country depend heavily on diesel. Farmers use it to operate tractors and other agricultural machinery. Construction equipment, industrial operations and portions of the shipping sector also rely on diesel fuel.
The national retail price of diesel reached approximately $6.31 a gallon Wednesday, according to AAA figures cited in the reporting, compared with about $3.70 a gallon one year earlier.
Regular gasoline was averaging approximately $4.37 nationally, up from roughly $3.19 a year earlier.
California motorists faced still higher diesel prices, with the state’s average above $8 a gallon Tuesday.
Wholesale diesel markets have also risen sharply. Ultra-low-sulfur diesel futures closed at $5.26 a gallon Tuesday before easing Wednesday.
The combination means businesses that depend heavily on transportation are facing sharply higher operating expenses.
Roukaya Ibrahim, chief commodity strategist at BCA Research, said prices may already have reached levels at which some companies begin curtailing activities that no longer make financial sense.
“It’s probably already leading to demand destruction,” Ibrahim said.
That process occurs when prices rise enough to cause consumers or businesses to reduce purchases or activity.
Higher diesel expenses can also move through supply chains rather than remaining confined to trucking companies or farmers. Businesses transporting merchandise can absorb the higher costs, reduce activity or attempt to pass some of those expenses to customers through higher prices.
Agriculture faces similar pressures as the country approaches harvesting periods for important crops.
“We’re nearing the harvest season for certain important crops in the U.S.,” Ibrahim said. “That’s also a source of upside pressure [on fuel] that could filter through to food prices.”
Those indirect effects are among the reasons economists are watching the energy shock for signs of broader inflation.
Fuel prices directly affect household transportation expenses, but petroleum costs can also influence air travel, shipping, manufacturing, agriculture and the prices businesses pay to move goods between producers, warehouses and stores.
The effect does not necessarily appear immediately throughout consumer prices because companies can temporarily absorb higher expenses, rely on hedging contracts or use previously purchased fuel.
If elevated energy prices persist, however, companies have more opportunities to adjust their own pricing and operations.
Recent economic data indicate households have relatively little additional savings available compared with several previous periods.
The Bureau of Economic Analysis reported that the personal saving rate fell to 3% in July. Americans saved an annualized $712 billion during the month, according to the agency, while personal consumption expenditures continued to increase.
The 3% rate was among the lowest levels recorded since the 2007-2009 recession, according to the Wall Street Journal analysis.
Michael Pearce, chief U.S. economist at Oxford Economics, said the higher energy burden is weighing on economic activity.
“It’s definitely a drag on the economy,” Pearce said.
Lower- and middle-income families can be particularly exposed because necessities such as fuel generally account for a larger portion of their available income than they do for wealthier households.
Families can respond by cutting discretionary purchases, using savings or taking on additional debt, but each option has limits.
Pointing to households drawing down savings to cover expenses, Pearce said, “That obviously can’t be sustained forever.”
Brown’s research illustrates the difference between the visible price displayed at the gas station and the cumulative national cost created when that increase is multiplied across millions of consumers and businesses.
When the tracker crossed $100 billion on Sept. 7, Brown calculated that gasoline and diesel increases were costing the average household more than $750 compared with the estimated no-war trajectory.
The total has continued rising since then.
Researchers stress that the calculation is an economic estimate rather than a direct government accounting of money spent on the war. It measures additional consumer fuel costs associated with the energy shock, not Pentagon expenditures for military operations.
It also captures only gasoline and diesel.
Other potential economic consequences — including changes in food prices, shipping expenses, airfares, business investment, interest rates and other consumer costs — are outside the tracker’s direct calculation.
Military expenditures are also separate.
That distinction means Brown’s estimate represents one portion of the conflict’s economic cost to Americans rather than the complete financial impact.
The pressure is continuing as oil remains above $100 a barrel and major supply routes remain disrupted. Brent crude settled Tuesday at $108.75, while diesel markets reached record levels and concerns over Middle Eastern shipping routes intensified.
For households, Brown’s estimate translates those market movements into a direct consumer measure: more than $100 billion in additional gasoline and diesel expenses since Feb. 28, with the total continuing to increase as elevated fuel prices persist.
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