MICHEL MARTIN, HOST:
The war in Iran is affecting gas prices in the U.S. It's jumped about 20 cents a gallon in the last two days. Energy customers in Europe and Asia are also feeling the effects after the U.S. and Israel launched attacks on Iran, and Iran retaliated across the Middle East. NPR's Scott Horsley is with us now to tell us more about this. Good morning, Scott.
SCOTT HORSLEY, BYLINE: Good morning, Michel.
MARTIN: So, you know, fighting in the Middle East always affects global energy markets. What are we seeing now?
HORSLEY: You know, sometimes all it takes is the fear of a supply disruption to push oil prices up, but supplies really are being affected this time. Iran itself is ordinarily a significant oil producer. More importantly, it sits just north of the Strait of Hormuz, which is a narrow waterway that serves as a transit point for about 1 in 5 barrels of oil produced anywhere in the world. And right now, insurance companies have stopped backstopping tankers in the strait, so that traffic has pretty much been choked off. Energy analyst John Kilduff of Again Capital says if those tankers don't start moving soon, neighboring Iraq may have to shut in some of its oil production, and that would not be so easy to restart.
JOHN KILDUFF: So this is becoming very much a real supply problem for this market in real time, like a slow-motion traffic accident coming to fruition here.
HORSLEY: In a social media post, President Trump is offering to have U.S. Naval vessels escort ships through the strait and to have the U.S. government provide an insurance backstop. Nevertheless, Brent crude oil prices have jumped above $80 a barrel in the last couple of days, and, of course, that trickles down to what drivers pay at the gas pump.
MARTIN: So would you put that price increase into context for us? How serious a jump is this?
HORSLEY: Well, the jump in gas prices overnight Monday was the biggest one-day increase since Russia's invasion of Ukraine four years ago, and we saw a similar size jump last night. AAA says that's pushed the average price of gasoline nationwide to $3.20 a gallon. The auto club's Aixa Diaz says the price shock caused by the war is just adding to the seasonal increase that we usually get in the spring.
AIXA DIAZ: This is the time of year when gas prices start to go up, and that's because demand is about to start going up. We've got spring break season kicking off soon. Also, refineries and gas stations will be making the switch soon to summer-blend gasoline. Summer-blend gasoline is just more expensive to make and produce. Therefore, that price and cost is passed down to the consumer.
HORSLEY: Now, for most of last year, we have been enjoying relatively low gas prices, and that has helped to put downward pressure on inflation, but gas prices are now about 10 cents a gallon higher than they were a year ago. In context, though, that's still a far cry from the $5 a gallon level we saw back in 2022.
MARTIN: OK. Scott, before we let you go, how does this affect the broader economy?
HORSLEY: Well, the more people have to pay to keep their cars gassed up, the less money they have to spend on groceries and entertainment and travel. So it's possible that discretionary spending will take a hit. The stock market fell sharply early yesterday with the Dow, at one point, down more than a thousand points, but investors later pared some of their losses.
You know, the long-term fallout is going to depend a lot on just how long the war goes on and how widespread the damage might be. Even with the recent run-up in prices, oil and gas is still cheaper now than it has been at many points in the past. And, you know, there are some things working in the U.S. economy's favor. We have a lot of domestic energy production, which makes us less vulnerable to global price shocks than a lot of other countries. And because we're more efficient than we used to be, rising energy prices just don't pack the wallop on the economy that they did, say, in the 1970s.
MARTIN: That is NPR's Scott Horsley. Scott, thank you.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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