Earlier this month President Trump withdrew the United States from the Iranian nuclear accord. While a discussion on the merits of that decision are better left to people far smarter than me, nearly everyone can agree on one thing: withdrawing from the agreement will have a negative effect on oil and, ultimately, gas prices. But the withdrawal from the Iran nuclear deal is but one small factor in the overall increase in the oil and gas prices.
Why Gas Prices Will Be on the Rise
The main factor driving oil higher is record demand. In fact, government data in April showed gasoline demand in the U.S. rose to a record of 9.86 million barrels a day, breaking last year’s daily record of 9.8 million barrels per day. Tom Kloza, global energy analyst at Oil Price Information Service noted that gasoline demand has never reached the 9.8 million barrels per day range before Labor Day.
How This Affects Us and the Economy
So, what will higher gas prices means for consumers and the economy as a whole? As gasoline prices rise, consumers will have less disposable money to spend on both necessary and discretionary spending. Analysts at Morgan Stanley estimate that average gasoline prices will rise to $2.96 per gallon this year. That increase would wipe out $38 billion in money from not just consumers and businesses, but also local, state and national governments. “That would wipe out about a third of the Trump” tax cut this year.
Currently, according to AAA, the average price per gallon of gasoline nationally is roughly $2.87. That is $0.53 per gallon higher that one year ago. In Knoxville Tennessee, the average price per gallon is $2.62, which is also $0.53 higher than last year.
Ultimately the people affected hardest are the poor and working middle class. While some gasoline use is discretionary, most gasoline usage is not. Struggling families will ultimately bear the brunt of the punishment for the increase in oil and gasoline prices.