By now, virtually everyone in America is aware that the Iran War has sent gas prices soaring and that many working-class drivers are struggling to afford this added expense. The question is not whether Americans have been harmed by these higher prices, but rather how much harm has been done so far, and how more is still yet to come. A new ITEP resource provides real-time answers to both these questions at the national and regional levels, and in the handful of states with available data.
Our analysis finds that, as of May 19, Americans have already spent $39 billion more for motor fuel (both gasoline and diesel) because of the Iran War. This number is growing by the day. We estimate that Americans will shell out an extra $3.5 billion for fuel over Memorial Day weekend alone because of the war and, if prices remain elevated over the summer, the total added expense by the time Labor Day arrives will surpass $116 billion.
These are not small amounts of money for the average American. The added expense per household so far is $291 and, by the end of summer, it is on pace to reach $870. By year’s end, the total cost per household could approach $1,450 if prices don’t come down.
Tracking the Cost of Higher Motor Fuel Prices Resulting from the Iran War
Detail
| Cumulative Costs | Costs for Other Periods | |||||
|---|---|---|---|---|---|---|
| Actual, to Date | Projected, by End of Summer |
Projected, by End of 2026 |
Projected Cost Over Memorial Day Weekend |
Projected Cost Over Next Month |
Projected Summer Cost |
|
- * Regional definitions are the Energy Information Administration's Petroleum Administration for Defense Districts and can be found online at: https://www.eia.gov/petroleum/gasdiesel/gas_geographies.php#statesmap.
- ** National totals for the federal government are based on a comprehensive measure of its gasoline and diesel fuel spending, whereas the state and regional figures only include civilian on-highway use by the federal government. Note also that this analysis includes only gasoline and diesel use, but jet fuel consumption is a far larger category of fuel spending for the federal government.
- *** The comprehensive cost figure is an economy-wide measure that includes not just the added cost paid directly by individuals at the pump, but also the added expenses falling on business purchasers and governmental entities that ultimately find their way to individuals through less direct channels.
- Note: Projections assume that current degree of price increase (measured as cents per gallon over the baseline) remains unchanged over the course of the relevant period being examined.
- Source: Institute on Taxation and Economic Policy analysis of data from the U.S. Energy Information Administration, Federal Highway Administration, and U.S. Census Bureau.
Our analysis also shows how these added costs are distributed across different parts of the economy and makes clear that no American is being spared from these higher prices.
Most of the added expense so far ($20 billion) has fallen on individual drivers as higher payments at the pump. On top of that, a significant share of the cost increase ($18 billion) has fallen on businesses that rely on motor fuel to move products, people, and equipment. Much of this added expense is finding its way to consumers as higher prices; many major delivery companies, for example, have already started tacking fuel surcharges onto their prices. Even people who drive very little, or who drive very efficient cars, are not immune from this cost increase.
Americans are also harmed by gas price increases weighing on the budgets of state and local governments. We estimate that those governments have paid $700 million extra so far to refuel school buses, garbage trucks, police cars, and other vehicles and equipment. If prices remain elevated through the end of the year, that total will rise to more than $3.6 billion, and taxpayers will ultimately pay that price either as reduced public services or higher tax levels. Ineffective gas tax holidays, of course, are yet another source of strain on public budgets in some states.
As dire as these numbers are, it’s important to note that they are not quite a comprehensive look at the growing cost of energy. In addition to the higher cost of motor fuel examined here the Iran War has also triggered a run-up in the price of other kinds of energy such as heating oil and jet fuel. As a result, airline ticket prices and the cost to taxpayers of operating military and other governmental aircraft is rising as well.
Even before the start of the Iran War, it was clear that the public was deeply concerned about the unaffordability of everyday life in America. As our new daily tracker makes clear, their reasons for concern have only increased in recent weeks, and it may be that the worst is still yet to come.
