The Iran war has led to a record high increase in gas prices.
New consumer price index data showed gas prices climbed 21.2% over the month in March. That broke the previous record one-month increase in the index from back in June 2009, when prices increased 20%. The sky-high increase contributed to roughly three-quarters of the overall CPI rise in March.
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Americans are worried about what the conflict means for energy prices. A Pew Research Center survey of about 3,500 US adults in March found 69% are either very or extremely concerned about higher gas and fuel prices due to US military action against Iran. More recently, the US and Iran agreed to a two-week ceasefire, which wasn’t reflected in the new CPI report.
Stephen Kates, a financial analyst at Bankrate, said the new report isn’t really a shock to people who’ve been visiting gas stations.
“Higher prices at the pump represent another headwind for household budgets, and this added ‘gasoline tax’ will crowd out other spending over time,” Kates said. “Households should take advantage of relatively lower grocery costs and consider shifting spending toward eating at home more often to offset the increased costs of commuting.”
Prices outside energy were more in line with recent behavior; core CPI, which excludes volatile food and energy prices, rose 0.2% over the month and 2.6% over the year.
AAA data showed gas prices skyrocketed in March, and the national average is at $4.153.
Those spikes in gas prices might not go away anytime soon. “Even if the prices of gasoline and diesel start to come down after the conflict resolves, the effect on the economy will be more long-lasting,” Kates said. “Fuel prices will not fall as quickly as they rose, but they should decline relatively quickly in the months following the end of the conflict.”
The war’s effects on energy don’t just affect gas prices. Economists have said to watch for changes in airline fares, for example. They rose 2.7% over the month in March.
“If you are planning a summer trip, book your flights immediately, as the 14.9% annual increase in airline fares suggests that travel costs will continue to climb as energy prices stay high,” Kates said.
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