The national average price of regular unleaded gasoline was $3.48 a gallon as of Monday, up more than 15% since the start of the Iran conflict, according to OPIS. Automakers are racing to gauge the potential effect on sales, which have started slowly so far this year with buyers continuing to fret over record new-car prices and still-high interest rates.
Brian Irwin, leader of the automotive-consulting practice at Alvarez & Marsal, said gas prices at these levels aren’t historically high, but the rate of their rise is noteworthy.
“It is the sudden and rapid changes in price that impact consumer buying behaviors,” Irwin said.
For many automakers, it is a headache they didn’t need after spending a year winding back plans to roll out new electric vehicles.
Newly freed from federal mandates to churn out fuel-efficient vehicles, General Motors, Ford Motor and Jeep-Ram parent Stellantis last year slashed production of EVs while doubling down on big trucks and powerful engines. Detroit’s automakers alone announced more than $50 billion in combined write-downs over scrapped EV plans.
Now, Wall Street analysts and investors are worried whether Detroit’s automakers and their truck-heavy lineups can weather this storm. Shares of Ford are down 13% since the war started, while GM has lost 5%.
Paul Krugman:
Donald Trump talked a lot of nonsense about energy during the 2024 campaign. But in fairness, some of the underlying premises behind “drill, baby, drill” were accepted by many people. At the very least, it was widely presumed that U.S. self-sufficiency in oil would protect America from disruptions in oil supplies overseas.
But that presumption was wrong. America produces a lot of oil, substantially more than we consume. Although we import some oil, mainly from Canada and Mexico, while exporting even more oil, mainly from Texas, we buy hardly any oil from the Persian Gulf. Yet the closure of the Strait of Hormuz has caused U.S. prices of oil products to soar. Self-sufficiency in oil has done nothing at all to insulate the U.S. economy from Middle East chaos.
Now, we should have expected that. Oil is traded on world markets, so the price is more or less the same everywhere. The two most widely watched barometers of oil prices are the West Texas Intermediate price in the United States and Brent crude in Europe. America exports more oil than it imports, while Europe is a massive net importer. Yet the two prices have moved in tandem over the years:
Some people have been shocked at the way U.S. gasoline, diesel and heating oil prices have soared over the past few days. But they shouldn’t have been surprised.
So does U.S. oil production give Americans no insulation at all from world market events? Not under the current rules of the game.
It could be different. In the 1970s the U.S. imposed price controls on domestically produced oil and partially insulated consumers from global oil shocks. Over time, however, these price controls led to shortages — the infamous gasoline lines. When price controls were lifted, they were replaced by a windfall profits tax intended to capture part of the gains experienced by oil companies. This tax was repealed after prices plunged in the mid-1980s.
Whatever you think of these past policies, however, they took place in a political environment in which corporations and moneyed interests in general had far less power than they do now. It’s almost inconceivable that 1970s-type price controls or excess profits taxes would be imposed today. So US prices of gasoline and other oil products reflect world crude prices, and the fact that America produces a lot of oil doesn’t matter at all.
If anything, US families are more exposed to Middle East chaos than their counterparts in, say, Europe or Japan, mainly because we drive bigger, less fuel-efficient cars.
The people who decided to begin this war should have seen this coming. All the evidence, however, suggests that they didn’t.
Not all global leadership are as completely blinded by Fossil Fuel addiction.
Insulating China from energy shocks has been a priority for leader Xi Jinping. Core elements of its strategy include ramping up the use of electric vehicles to replace gas-guzzlers while simultaneously pumping more crude from inside China’s borders. A deepening energy partnership with Russia, meanwhile, has helped curtail Beijing’s reliance on the Middle East.
At the same time, China has accumulated massive oil stockpiles, likely totaling more than 1.2 billion barrels, enough to cover its imports for around 100 days or more.
In a sign of continued stockpiling by Beijing in the lead-up to the Iran war, customs data released Tuesday showed that China’s crude imports rose nearly 16% in the first two months of 2026 compared with a year earlier.