I’ve really been concerned lately about the fact that U.S. gasoline and diesel prices have reached historic highs. According to data from the American Automobile Association, the national average for gasoline has recently risen to $4.12 per gallon. This is higher than $4.07 per gallon during the Russia-Ukraine war in 2022. As for diesel, it has reached $5.65, which is more than 60 cents higher than the previous peak from the same period.

The main reason energy prices are getting to this level is military tensions between the U.S., Israel, and Iran that have been ongoing since late February this year. During this period alone, gasoline prices have jumped by more than $1.10 per gallon. Recently, they’ve come down a bit on expectations of ceasefire negotiations between the U.S. and Iran, but overall, prices remain abnormally high.

In a recent interview, the U.S. Secretary of Energy pointed out that gasoline prices may stay at these high levels for the next few weeks. In fact, the U.S. Energy Information Administration’s forecast suggests that if the conflict ends by April, the nationwide gasoline retail average for the second quarter is still expected to be about $4.16. In other words, even if conditions stabilize, consumers will continue paying higher fuel costs than usual for the time being.

More troubling is the chain reaction caused by rising diesel prices. Diesel is a key energy source for transportation, agriculture, and industrial production, so its price increases directly feed into virtually all final consumption prices, from food to logistics. This is already starting to show up in inflation data. In addition, rising aviation fuel costs are also rippling through to airline ticket prices, meaning consumer burdens are likely to increase further heading into the upcoming summer travel season.

Analysts believe that if energy prices continue at this level, consumers’ disposable income will be increasingly squeezed, and recovery across the entire economy could be slowed down. It really looks like a tough situation will continue.