Pain at the pump — American motorists feel the jerk as Iran war propels petrol prices

Virginia/Maryland — Just two months ago, Muhammad Jamaal, an Ethiopian-American Uber driver, changed his petrol Toyota Camry for an electric KIA EV6. At the time, he did not know that the US and Israel would jointly attack Iran, and that gas prices would increase sharply across the United States and elsewhere as a consequence.

Given the hike in the regular petrol price to a national average of $3.598 on Thursday, from $2.94 a month prior — linked to the Iran war and disruptions in the Strait of Hormuz — Jamaal is pleased with his decision.

"The recent increase in petrol prices has undoubtedly affected all Uber drivers. Previously, I would refuel almost four times a week," he tells TRT World. "I can only imagine how much more I would be paying now if I were still driving my old petrol car."

"The (oil) price is crazy here," says Iskender, another Uber driver. "But our fares have not changed."

For Ali Moosa, who drives a hybrid Toyota Highlander, a rise in oil prices is a "bad news" for an Uber driver and his family.

"Look, if the travel company does not increase fares, I will consider stopping driving and seek alternative employment," he says.

The oil market has experienced significant volatility since the US and Israel initiated strikes against Iran on February 28. Tehran retaliated by attacking targets across the oil-rich Gulf and effectively closing the Strait of Hormuz, a crucial waterway through which 20 percent of the world’s oil flows by ship.

Concerns are escalating about the impact on everyday individuals globally, particularly the most at-risk, should the war drag on.

On Thursday, Iran's Revolutionary Guard Corps vowed to maintain the closure of the strategic strait following a call to action by Mojtaba Khamenei, whose father, Ali Khamenei, is among approximately 1,300 Iranians killed so far in joint US-Israeli attacks.

Khamenei's comment, his first since becoming Iran's new Supreme Leader, came after a top Iranian official warned that any vessel linked to the US, Israel or their allies would be targeted in the Strait of Hormuz and around.

"You will not be able to artificially lower the price of oil. Expect oil at $200 per barrel," the official warned.

Possibility of $150 or $200 a barrel?

To overcome the supply shocks, the US will be releasing 172 million barrels of oil from its strategic petroleum reserve that officials say is part of a broader release of 400 million barrels of oil agreed to by the 32-nation International Energy Agency (IEA), which in its Thursday report warned that the war was "creating the largest supply disruption in the history of the global oil market," estimating the global supply would plunge by 8 million barrels per day in March.

US officials say the release is set to commence next week, with delivery expected to take roughly 120 days.

With Iran warning oil prices — currently above $100 a barrel — could reach $200 per barrel after multiple ships were struck by projectiles, analysts say regular petrol prices could surpass $5 per gallon if Tehran's threat materialises.

"If 2022, after the start of the Ukraine war, is any indication, $100 brings $5 gas. People forget that the CPI rose 9.1% in June of that year, which caused panic among some economists," argues Douglas A. McIntyre, an expert on corporate finance and the automotive industry.

"$200 oil does not immediately cause $10 gasoline. It certainly takes the price much, much higher than $5. The CPI carries a heavy weight of oil and gas, which were the primary components of the June 2022 number."

Other analysts have cautioned that prices could potentially surge to $150 a barrel or more.

"This crisis that is hitting energy — it hits everything," Jason Miller, a professor of supply chain management at Michigan State University told ABC News.

"The possibility of $150 or $200 a barrel is not folks disliking the president and saying these numbers for political reasons," Miller said. "This is just economic reality."

Another analyst Omair Sharif warned that, "It will really start to eat into disposable income for consumers if it persists for several months."

Middle Eastern nations have already cut oil output by roughly two-thirds following the strait's closure.

US sees prices dipping soon

US officials, however, suggest the fuel price surge is short-lived and unlikely to sustain.

Speaking to reporters on Tuesday, White House Press Secretary Karoline Leavitt said that "Americans will see oil and gas prices decrease rapidly" after the war with Iran ends, but Iranian officials maintain the country won't yield to President Donald Trump's demands.

Earlier this week, US Energy Secretary Chris Wright anticipated that energy price spikes will be short-lived and that the US will not target Iran's energy sector.

Speaking to CNN on Thursday, Wright defended the US-Israeli war on Iran — now in its 14th day — arguing, "We are defanging Iran's abilities to threaten American troops in the area, its allies, its neighbours, and global energy markets. So, yes, you've gotta go through short term pain to solve a long term problem."

Asked if we are in the midst of a severe global oil crisis, Wright said, "We're in the midst of a significant disruption in the short term to fix the security of energy flow for the long term."

Most Americans are, however, concerned about oil prices and do not anticipate a swift resolution to the war.

According to a recent Quinnipiac University survey, 74 percent of Americans are either "very concerned" or "somewhat concerned" oil and gasoline prices will rise in the US because of the Iran war.

Similarly, 63 percent of people polled by Morning Consult recently said they were concerned about gas prices, with 38 percent saying the US should consider "diplomatic resolution" to bring prices down.

And, according to a Reuters/Ipsos poll, some 67 percent of respondents - including 44 percent of Republicans and 85 percent of Democrats - say they expect gas prices in the US to get worse over ​the next year.

President Trump has mostly downplayed the significance of hike in energy prices as temporary and secondary to national security goals. He has emphasised that prices will drop rapidly once the war ends and the Iranian nuclear threat is neutralised.

Describing higher oil prices on Sunday as a "very small price to pay" for US and global "safety and peace," Trump has asserted they are short-term and will fall quickly after the destruction of Iran's nuclear capabilities. 

"I don't have any concern about it," he told US media last week, when asked about the higher prices at ‌the pump. "They'll drop very rapidly when this is over, and if they rise, they rise, but this is far more important than having gasoline prices go up a little bit."

In a Truth Social post on Thursday, Trump posited that rising oil prices could benefit Americans.

"The United States is the largest Oil Producer in the World, by far, so when oil prices go up, we make a lot of money," he wrote.

"BUT, of far greater interest and importance to me, as President, is stoping an evil Empire, Iran, from having Nuclear Weapons, and destroying the Middle East and, indeed, the World. I won't ever let that happen!"