MercoPress. South Atlantic News Agency

Another front for Trump, “pain in the pump”, gasoline above US$ 4 a gallon

The US$4.02 average price a gallon in US is the highest since August 2022. And the average price for diesel is now US$ 5.45, according to AAA

”If the (Iran) conflict is contained soon, the hit to confidence may be temporary, but a prolonged crisis could prompt more precautionary saving and further discretionary spending cuts,” warned Moody’s in a report on the current war in the Middle East, and the impact for US households.

 This follows a report from the AAA motoring organization reporting that the average price of gas at the pump has topped US$ 4 in the US for the first time in nearly four years as the Iran war continues to push up fuel prices.

The national average for a gallon of regular gasoline is now US$ 4.02, more than a dollar higher than when the war began, while the price of diesel is also around US$ 1.70 higher.

The effective closure of the Strait of Hormuz, for the past month has meant the production and transportation of energy across the Middle East has slowed or stopped entirely, and the cost of crude oil, a vital ingredient in gas and diesel, has surged as a result.

Before the conflict began on 28 February, gasoline in the US averaged about US$ 2.98 a gallon. Diesel, key to goods transport, was about US$ 3.76. The average price is now US$ 5.45, a rise expected to feed into higher food costs.

In addition to high crude oil prices, last week the AAA also pointed to high demand for gas from spring break season as another factor in rising pump prices.

The US$4.02 price is the highest since August 2022. As it is a national average, drivers in some states will have already been paying more than the four dollars a gallon.

Average prices are still below the record highs of US$ 5.01 for gas and US$ 5.81 for diesel, set in June 2022 in the aftermath of Russia's invasion of Ukraine. But the run-up in prices could have a bigger impact on household budgets this time, pointed out Moody's.

Higher wholesale energy prices often show up first at the fuel pump and this is being seen, not just in the US but around the world. In the UK, average petrol prices have risen by 14% and diesel by 27% since the war began.

In Uruguay the government announced a 7% increase for all fuels and cooking gas, beginning April and diesel for fishing vessels has been rationed, while Australia has halved fuel sales tax for three months, and Sri Lanka and Bangladesh have introduced fuel rationing. Slovenia last week became the first EU country to ration fuel.

For President Trump’s administration, based on historical trends, gasoline prices exceeding US$ 4 a gallon is considered a serious liability for the incumbent party. High gasoline prices often correlate with lower presidential approval ratings, as voters experience “pain at the pump” daily, and if high interest rates are not lowered they make financing major purchases like homes and cars more expensive, impacting household budgets.

In effect a 2016 study found that a 10-cent increase in gasoline prices in the US correlates with a 0.60% decrease in presidential approval. A 2024 analysis also indicated that if gas prices surge toward US$4 a gallon, significantly damages the incumbent’s reelection chances. “Voters consistently identify the cost of living as a top issue, and both high fuel prices and high borrowing costs reduce disposable income”.