Gasoline and diesel futures experienced a sharp increase following attacks on Iran by the US and Israel. This disruption jeopardises one of President Trump’s key energy initiatives. Gasoline futures rose as much as 9 per cent, causing a near standstill in tanker traffic through the Strait of Hormuz. The American Automobile Association reported that average retail gasoline prices in the US reached $US3 a gallon on Sunday, a three-month high.
President Trump has often highlighted decreasing gasoline prices as evidence of American energy dominance. He recently claimed prices were below $US2.30 a gallon in most states, despite the national average being $US2.98. The current price surge, regardless of its duration, could present a major challenge for the president and his party as midterm elections approach later this year.
According to Patrick De Haan, head of petroleum analysis at GasBuddy, Americans have strong opinions about gasoline prices, making it a potential political issue. Global oil futures also saw a significant increase, rising as much as 14 per cent, the largest jump in four years. Crude oil prices account for approximately half of the cost of gasoline at the pump, and rapid increases in oil prices typically lead to corresponding increases in gasoline prices.
Christopher Knittel, an energy economics professor at MIT, described this phenomenon as the “rockets and feathers effect,” noting that price increases tend to occur rapidly. The situation underscores the sensitivity of fuel prices to geopolitical events and their potential impact on consumers and political landscapes.
