Higher prices at the pump could cost American families hundreds of more dollars in 2018, according to estimates, meaning some recent gains from tax cuts could be lost to pricey gasoline.
Rising gasoline prices are already eating into people’s pocketbooks, and estimates suggest Americans could pay $200 to $300 more during this summer driving season.
A family of four earning the median income is expected to see about $2,000 in tax cuts this year, Republicans said. President Donald Trump signed tax cuts into law late in 2017.
The Oil Price Information Service (OPIS) estimated Americans will spend $200 more on fuel this summer, while the U.S. Energy Information Administration (EIA) projected Americans on average will spend $300 more on gas this summer.
OPIS and EIA figures only estimate the cost of driving, which Americans can mitigate to an extent by driving less. However, higher fuel prices permeate throughout the economy, adding to the cost of shipping and transporting goods.
So what’s driving up prices at the pump?
The Trump administration’s slapping new sanctions on Iran coupled with broader economic trends look to be driving the average gas price past $3 per gallon. The White House re-imposed sanctions lifted by the Obama administration in 2015.
AAA Fuel Gauge noted that “[s]ome of the pre-2015 sanctions targeted the Iranian energy sector and impeded Iran’s ability to sell oil,” meaning “Iran’s crude exports are forecasted to decrease, contributing to already declining global crude supplies amid growing global demand.”
Currently, the average gas price stands $2.91 per gallon, up 58 cents from 2017, according to AAA Fuel Gauge. Gas prices are expected to increase as Iranian crude comes off the market and fuel demand increased.
However, putting Iranian sanctions back in place could be hard to enforce. Iranian crude being taken off the market can also be readily replaced by increased Saudi Arabian and Russian production. (RELATED: Energy Companies Take ‘Oil’ And ‘Gas’ Out Of Their Name)
Market analysts surveyed by S&P Global Platts estimate less than 500,000 barrels after six months of sanctions. U.S. allies will likely cut Iranian crude purchases, and other OPEC members could make up the slack.
Higher oil prices are also expected to boost U.S. oil production. Domestic producers have broken records in 2018, and could continue that streak if prices continue to rise. EIA projects U.S. production to hit 12 million a day by the end of 2019.
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