Oil Prices Are Soaring. Will Gas Hit $5 a Gallon Soon?

Gas prices in the U.S. have surged 61.8 cents in the past month, a fierce spike as the Iran war shocks oil and gas markets worldwide.

The state average has already crossed the $5 barrier in California, where drivers are now paying $5.29 per gallon — nearly 80 cents more than a month ago, according to AAA data. It raises the question: Could the national average surpass $5 again, as it did briefly in June 2022 in the early phase of the war between Russia and Ukraine?

About 20% of global oil supply is currently disrupted at the Strait of Hormuz, according to Rapidan Energy Group, and the price for crude oil, which makes up about 47% of what drivers pay for gas in the U.S., has risen about 32% in a month.

"The parabolic price hikes make transposition to words difficult," Tom Kloza, an independent oil analyst, said in written observations.

After rising to a peak above $110 Monday, oil prices tumbled later in the day as President Donald Trump told CBS News the war was "very complete." Brent crude — the global oil benchmark — was trading around $91 per barrel as of press time Tuesday morning.

"Consumers have seen gasoline prices surge at one of the fastest rates in years after oil prices spiked following U.S. strikes on Iran," Patrick De Haan, head of petroleum analysis at GasBuddy, wrote in a blog post Monday.

Gas prices increase: Will the national average reach $5?

The national average is expected to jump further this week given the latest surge in oil above the $100 per barrel mark for the first time in four years.

"A freeze of current wholesale numbers would imply that we’ll see the nationwide average get to either side of $4/gallon," Kloza wrote. "This may happen within the next 72 hours."

Other western states like Washington ($4.69) and Hawaii ($4.59) could be next to join the $5 club. As of Tuesday morning, the only other states with gas above $4 were Nevada ($4.30) and Oregon ($4.26), according to AAA.

The national average is $3.54 per gallon, up from $2.92 a month ago. GasBuddy reported that prices in "many states" could jump by 20 to 50 cents this week.

"With additional attacks across the Middle East over the weekend pushing oil above $100 per barrel for the first time in years, fuel markets are now rapidly recalibrating to the risk of prolonged disruption to global supply flows," De Haan said.

There's still a ton of room for the national average to run before the $5 per gallon threshold would be in jeopardy. As a general rule of thumb, gas prices rise by 25 cents with a $10 swing in the price of oil.

So at this point, $4 gas seems more within the realm of possibility. But $5 gas during this war cannot be ruled out entirely, given the volatility that comes with missiles and drones being launched in the world's top oil-producing region.

"We’ve rallied to $100-$120 per barrel oil even though most assessments believe the Strait will be reopened for business this month," Kloza wrote. A "worst-case scenario" in which Iran attacks ships passing the strait could propel prices to "the $125 to $160 per barrel range," he added, which could put gas prices in the vicinity of $5, if sustained.

South Korea just introduced a 'gas price' cap. Could the U.S. follow?

On Monday, South Korean President Lee Jae Myung announced that the government is capping fuel prices, a move South Korea hasn't made in nearly three decades. He said the country will "swiftly introduce and boldly implement" a system with maximum prices for gas and diesel.

More details are expected later this week.

In the 1970s, the U.S. enacted price controls on gasoline, which were lifted in 1981 by President Ronald Reagan. That was 45 years ago, and gas price controls have not been floated seriously in the U.S. recently.

Trump is reportedly reviewing a set of options to try to keep oil prices in check, according to a Reuters article that mentioned discussions about potential releases of oil from strategic reserves. Relief could also come in the form of looser sanctions on oil-producing countries like Russia or the government waiving certain federal taxes.

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