Gas prices are continuing to plummet, despite the escalating Israel-Hamas war. The average price for a gallon of regular gas in the U.S. was $3.496 on Sunday, slightly lower than the previous day, according to AAA. This price is also lower than it was at the same time last week, last month, and last year.
However, the uncertain nature of the conflict could impact gas prices in the future. Severin Borenstein, a professor at the University of California, Berkeley’s Haas School of Business, and faculty director of the Energy Institute at Haas, stated, “I think there’s so much uncertainty… Things could change very quickly.”
So, what do U.S. consumers need to know?
Why are gas prices declining?
While oil prices briefly spiked after Hamas initiated the attack on Israel earlier this month, they have since dropped by almost $10 a barrel. Borenstein explains that a $1 change in oil prices typically results in a 2.5 cent change per gallon of gas at the pump. However, it takes longer for gas prices to decrease than to rise, so this ripple effect is only gradually manifesting now.
The limited scope of the war has also had a restricted impact on gas prices. Borenstein remarks, “What’s going on with Israel and Hamas right now has not at this point become a wider war that has encompassed major oil producers, but that could change… And if it does, we could see crude oil prices go up.” AAA spokesperson Andrew Gross concurs, describing the response from the oil market as “rather muted.”
Gross adds that gas prices typically decline in the fall due to seasonal factors. He explains, “It’s a bit of a seasonal swoon, with school back, the days getting shorter, and the weather more challenging – all of this leads to a dip in demand.”
How long will gas prices keep dropping?
Gross predicts that gas prices will continue to follow the usual pattern, falling towards the festive season and then gradually rising again in spring and summer. Borenstein suggests that gas prices could decrease by an extra 10 cents per gallon if oil prices stay stable. However, he emphasizes the difficulty in accurately predicting crude oil prices, stating, “And right now, they’re extremely difficult to predict.”
Will the Israel-Hamas war cause gas prices to go up?
There is a possibility. Borenstein explains that if the conflict expands into a broader regional war involving major oil producers like Iran, it could disrupt shipments or result in political backlash, leading to an increase in oil and gas prices.
Borenstein believes that the former scenario poses a greater risk than OPEC countries reducing their output in protest since most OPEC member countries require the revenue. President Joe Biden has issued multiple warnings to Iran and its proxies, urging them not to escalate the conflict.
However, the outcome remains uncertain. Borenstein asserts, “It’s so hard to know how the war might spread.”
Nathan Diller is a consumer travel reporter for USA TODAY based in Nashville. You can reach him at [email protected].
This article originally appeared on USA TODAY: Gas prices are dropping amid Israel-Hamas war, but could go up
