Experts say the ongoing conflict between Israel and Hamas could lead to a spike in gas prices in the U.S.
Oil prices have fluctuated in the days since the attack, but overall there was an initial spike in crude oil futures of roughly 4-5% that has so far leveled off.
Gas prices surged in the U.S. in the summer of 2022, hitting a national average of $5 per gallon of regular gas in part because of the Russian invasion of Ukraine.
To combat those higher prices, President Joe Biden released tens of millions of barrels of oil from the Strategic Petroleum Oil Reserve, the nation’s stockpiles normally reserved in case of emergencies.
According to the federal Energy Information Administration, that reserve has been nearly cut in half since 2020.
Biden took fire for releasing the oil from critics who said he was only doing it because the 2022 midterm elections were drawing nearer and that lowering the stockpile so dramatically could leave the U.S. vulnerable in case of a large-scale conflict.
Now that a conflict may be on the horizon and Middle East oil supplies are even more volatile, that criticism has resurfaced.
“How high will oil prices go?” Peter St. Onge, an economist at the Heritage Foundation, wrote on X, formerly known as Twitter. “Goldman and Bloomberg are already calling $100 oil. Some are saying $150 if Iran gets involved. Joe Biden broke all the easy solutions after he drained the Strategic Petroleum Reserve to just 17 days. Then burned the Saudis over and over, who may be in no mood to help.”
Lambermont said these and other policies have left the U.S. unprepared for global shocks.
“Unfortunately, the Biden administration has long been pushing policies that reduce the oil supply,” she told The Center Square. “Just in the last several weeks, the administration canceled seven oil and gas lease sales in the Arctic National Wildlife Refuge, proposed a new rule to impose an outright ban on oil and gas leasing in the National Petroleum Reserve-Alaska, and released an offshore oil and gas lease sale plan that the administration boasts would have ‘the fewest oil and gas lease sales in history.’”
As The Center Square previously reported, Hamas terrorists fired thousands of missiles into Israel over the weekend, and militants spread throughout the country, killing and capturing both soldiers and civilians. The casualty numbers are still in flux, but hundreds of Israelis were killed and even more injured.
Israel quickly fired back, launching strikes in Gaza and declaring war, promising unparalleled retribution for the attacks. The conflict, which is likely to escalate and continue for at least the rest of this year, has raised questions about the U.S. financial and military aid to Israel as well as how oil markets will be impacted.
“Historically, any tensions in the Middle East cause market volatility, and I don’t see this being any different especially if Israel takes direct action against Iran,” Daniel Turner, executive director of the energy workers advocacy group, Power the Future, told The Center Square. “The Iranian regime feels particularly empowered right now. They see Carter-esque weakness in the White House and have built strong alliances with China and Russia.”
According to AAA, the national average price for a gallon of regular gasoline is $3.66.
“Despite sanctions and international pressure, many of our adversaries never stopped producing and selling oil, and now they are cash rich and emboldened,” Turner said. “Higher oil prices are better for them and will likely result from inevitable escalating violence in the region.”
For now, experts say the impact on prices will largely depend on the length of the conflict and which world powers get involved.
“Prices at the pump are sensitive to world oil markets because the cost of crude oil is set at the global level and makes up more than half the cost of refined gasoline in the United States, on average,” Travis Fisher, an economist at the Cato Institute, told The Center Square. “Any upticks in crude oil prices tend to translate to increases in gasoline prices.
“For now, the price increases in global crude oil markets appear modest, but that could change if the conflict widens.”
