Gas Prices Top $4 – And Motorists Aren’t the Only Ones Hurting

Gasoline prices topped $4 a gallon for the first time in nearly four years. As bad as that might seem for consumers, it could be even more trouble for an auto industry looking to the future with mounting trepidation. Headlight.News has more.

If you’re one of those who’ve become fixated of late following the rising cost of gasoline on the site GasBuddy.com you’d have noticed the passing of a milestone on Monday evening. While the figure varies widely by state, the typical American motorist saw the cost of regular self-serve gasoline jump to $4.00 a gallon for the first time since August 2022.

That’s up about $1.04 a gallon from the February average, according to the real-time tracking service. The average American household was already spending about $201 a month on gasoline, according to data from the U.S. Dept. of Labor, or 3.1% of their total annual budget. A roughly one-third increase in fuel costs adds to the pressure consumers are already feeling from inflation on food, health care and housing.

But motorists aren’t the only ones worried about how much further fuel prices might rise. Industry insiders worry that a long-term continuation of the Iran War – especially if fuel prices continue to spike – could result in a sharp downturn in auto sales, with a concurrent dip in employment.

What’s new

Within hours after the U.S. and Isreal began bombing targets in Iran fuel prices began to climb. Trading on the commodity market appeared to hit a ceiling last week just below $4. Traders initially appeared buoyed by comments from the president who said he’d delay ramping up the air war suggesting peace talks were underway with the Islamic Republic’s new leaders.

But patience appeared to wear thin on Monday, with Iranian officials denying there were any negotiations, and with few signs they’d back down, reopening the strategic Strait of Hormuz to oil tanker traffic. Benchmark Brent Crude futures surged toward $120 a barrel, while both GasBuddy and AAA data found fuel prices across the U.S. finally breaking through the $4 wall. As of late afternoon Tuesday, motorists could expect to pay an average $4.03 for self-serve unleaded, though there were signs the numbers, both for crude oil and U.S. gas prices, would continue rising.

This marks the highest amount U.S. motorists have been asked to pay since August 2022 when the energy market was roiled by Russia’s invasion of Ukraine.

The impact

Gas prices are now up by about 35%, or more than $1 a gallon, since the bombing campaign began. Based on the typically American household’s fuel consumption, that would add almost $70 a month to family fuel bills – or more than $800 a year, at a time when inflation is already making it difficult for millions of consumers to handle their other necessities.

That’s likely to force many Americans to rejig their household budgets and, where possible, reduce the amount of driving they do, said Erin Keating, senior auto analyst with Cox Automotive. Several sources said they’d not be surprised if some corporations reverse back-to-work orders to help reduce commuting costs.

When it comes to the auto industry, however, “We’re in uncharted territory,” suggested Sam Fiorani, lead analyst with AutoForecast Solutions.

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Shifting habits

Back in the 1970s, twin Mideast oil shocks radically reshaped the global auto industry. That was especially apparent in the U.S. where millions of motorists traded in classic, gas-guzzling Detroit iron for more fuel-efficient Japanese models.

Patterns may be repeating themselves, several industry insiders told Headlight.News. “Jeep hybrid” is currently the most popular search term for those checking out the off-road brand, said its head of global communications, Andy Bowman. Korean automaker Kia, meanwhile, has seen a sudden surge in interest in both its hybrid and all-electric products, noted U.S. marketing chief Russell Wager.

For her part, Cox Auto analyst Keating doesn’t expect to see much movement in what motorists actually wind up buying, however, unless the Iran War starts to drag on for quite a few more months. If that happens, and fuel prices remaining high, “People are going to look where they can scrimp and save and adjust their buying habits.”

Automakers face trouble

It’s also quite possible that potential buyers may simply sit out of the market, said Sam Abuelsamid, lead analyst at Telemetry Research.

Most forecasts call for a modest reduction in demand from 2025’s 16.2 million new light vehicles sold in the U.S. That was a 2.5% year-over-year increase, and the best tally since the pandemic hit in 2020. Cox Automotive is still holding to a target of 15.8 million for 2026 but if the war and other factors trigger a recession all bets are off, acknowledged Keating. Telemetry’s Abuelsamid says the market could plunge to 15 million – or lower.

If that were to happen, he added, “We’re going to see job losses” that could contribute to a vicious economic down cycle.

This could become Trump’s headache

Rising fuel prices are most directly felt at the pump. But they’re passed on in many other ways, from shipping costs to airline ticket prices. That’s led the Organization for Economic Cooperation and Development to warn U.S. inflation could rise to 4.2% this year.

For his part, Pres. Trump has largely dismissed rising fuel prices, at one point suggesting it’s a good thing, “We make a lot of money,” because of America’s dominance in energy. He also said, “I don’t have any concern about it,” in an interview with Reuters. “They’ll drop very rapidly when this is over, and if they rise, they rise, but this is far more important than having gas prices go up a little bit.”

Such comments don’t appear to be playing well with the public, especially as rising fuel costs are directly the result of what has become an extremely unpopular war. What is clear is that Trump’s popularity has sunk sharply over the past month.

How high is up?

The Environmental Protection Agency has stepped in, relaxing rules requiring the use of cleaner – albeit more expensive – blends of gasoline during summer months. But that is expected to result, at most, in a savings of 10 cents a gallon.

Some states have begun considering temporary measures reducing fuel taxes. Gov. Brian Kemp signed a bill suspending the collection of the state’s $0.333 per gallon excise tax through the end of May.

But that may only provide a temporary buffer, warned independent oil analyst Tom Kloza. “$5 gas is in the realm of possibility,” he has warned, according to CNN.