US Gasoline Prices Hit $4.54 Average Amid Iran War Oil Disruptions

Gasoline prices across the U.S. rose to an average of $4.54 a gallon on Wednesday, the highest level since July 2022, according to AAA data.

The price of regular gas has increased 52%, or $1.56 per gallon, since the start of the Iran war in late February. Disruptions to oil flows in the Middle East have driven up costs for motorists.

Fuel costs rose even as oil prices dipped Wednesday amid renewed hopes for a U.S.-Iran agreement. That gap shows a split between crude markets and pump prices. Worries about supply disruptions, along with broader violence in the Middle East, lifted fuel costs over the past week.

"Gasoline prices rose in every state over the last week, with some of the most significant and fastest increases concentrated in the Great Lakes, where states like Michigan, Indiana, Ohio and Illinois saw sharp spikes, while Wisconsin experienced more modest gains," Patrick De Haan, a petroleum expert at GasBuddy, said in a report.

Brent crude, the international benchmark, fell $7, or 6.4%, to $102.83 a barrel on Wednesday. West Texas Intermediate, the U.S. benchmark, dropped 6% to $96.11. Global oil supplies stay tight because the Strait of Hormuz, which carries 20% of the world's oil and liquefied natural gas, remains largely closed to ship traffic.

"We're now over two months from when the conflict began," Dave Sekera, chief U.S. market strategist at Morningstar, said in an email. "It just appears like we're not any closer to a long-term resolution. Yes, there are some ships here and there getting through the Strait of Hormuz, but effectively, it still seems closed, and the supply of oil and natural gas is still a lot lower than pre-conflict."

Even if the U.S. and Iran reach a peace deal, gas prices will likely stay high for months, experts predict. Brent crude could trade around $80 a barrel by year-end, $10 above pre-war levels, per an April Goldman Sachs estimate.

Goldman based that on oil supplies in the Persian Gulf normalizing by mid-May, though it noted significant upside risks to the forecast.

Global oil inventories near their lowest since 2018, which raises fears of a supply squeeze, according to the investment bank's May 4 report.

"As the oil tanks go dry, as we use up the last of the inventory, that's when the real crunch is going to start to hit," John Quigley, a senior fellow at the Kleinman Center for Energy Policy at the University of Pennsylvania, told CBS News Philadelphia. "Prices have to go much higher."

Gas prices depend on more than crude oil prices. Petroleum supplies and the restart of Middle East refineries damaged in the Iran war play a role. Seasonal demand, like more gasoline use in summer, also pushes costs up, De Haan said.

"With so many moving pieces, the outlook remains highly fluid, and while some localized relief may emerge, broader price volatility is likely to persist in the near term," De Haan said in a report.