Fallout of Prolonged Iran War... Americans Spend an Additional $67 Billion on Fuel

Gasoline Prices in U.S. Soar 50% Amid Hormuz Blockade
Fuel Consumption Drops Among Low-Income Households, Inflation Pressures Intensify
Global Coal Power Makes a Comeback as Oil Price Shock Hits Hard

Since the outbreak of the Iran war, Americans have spent $45 billion (approximately 67.5 trillion won) more on gasoline and diesel purchases compared to last year.

A gas station in Los Angeles, USA, on the 7th of last month. Photo by AP Yonhap News

According to Yonhap News, on the 16th (local time), the Wall Street Journal (WSJ) analyzed data from the energy price information firm OPIS and found that, since the outbreak of the Iran war, cumulative fuel expenditures by U.S. households have increased by $45 billion year-on-year. The United States and Israel launched joint airstrikes on February 28, citing the need to deter Iran’s nuclear development, while Iran responded by threatening to blockade the Strait of Hormuz, causing global energy prices to surge.

The Strait of Hormuz is a critical chokepoint in the global energy supply chain, with about 20% of the world's seaborne crude oil passing through it. As Iran gained control over the Strait, international oil prices, using Brent crude as a benchmark, soared by more than 10% in the early days of the conflict. In the U.S., gasoline prices, which were below $3 per gallon just before the war, jumped by over 50% after the outbreak, surpassing an average of $4.5 per gallon. JP Morgan estimated that if gasoline prices remain at current levels until the end of this year, Americans will be forced to spend an additional $172 billion (approximately 258 trillion won) compared to last year.

The burden of rising fuel costs is falling most heavily on low-income groups. In April, the U.S. Consumer Price Index (CPI) rose 3.8% year-on-year, marking the highest rate since May 2023. The main driver was a 17.9% surge in the energy index. According to Bank of America (BoA) Institute, while middle- and high-income households increased their spending on air travel, lodging, and tourism year-on-year, low-income households actually reduced their spending in these areas. Data from the Federal Reserve Bank of New York also showed that average gasoline consumption among households with annual incomes below $125,000 has decreased.

The shock of high oil prices is reshaping the global energy landscape. According to the WSJ, Taiwan has restarted coal-fired power plants that had previously been shut down, and South Korea also increased its coal power generation by more than one-third last month. In Europe, Italy has put its coal-fired power plants on emergency standby in preparation for prolonged energy shocks, while the spot price of coal at Newcastle, Australia's main export port, has risen by 12% since the conflict began.

As a result, there are growing concerns that the recent trend of reducing coal power generation to combat climate change is being reversed due to the impact of high oil prices. Coal combustion emits about twice as much carbon dioxide as natural gas, raising fears that this shift will undermine climate goals.

However, experts expect that it will take considerable time for the market to normalize. In an interview with the Financial Times (FT) in March, Fatih Birol, Executive Director of the International Energy Agency (IEA), described the current situation as "the greatest energy crisis in history," and projected that "it will take at least six months for the market to recover."

This content was produced with the assistance of AI translation services.