Chart illustrates the breakdown of costs included in the price of a gallon of gasoline

How the Iran Conflict Is Affecting U.S. Gas Prices

The recent conflict involving Iran has triggered a significant disruption in the global oil supply, leading to a noticeable increase in gasoline prices for American consumers. Since the outbreak of hostilities on February 28, the average price at the pump has climbed by about 60 cents per gallon. But what role does the price of oil play in determining what drivers pay for fuel?

Patrick De Haan, a petroleum analyst at GasBuddy, explained to CBS News that oil prices, which are set by the global market, have the greatest influence on gasoline costs.

Although the United States leads the world in crude oil production, according to the Energy Information Administration (EIA), domestic gas prices are more closely tied to Brent crude—the international standard—than to the U.S. benchmark, West Texas Intermediate.

Ehud Ronn, a professor at the University of Texas at Austin, noted that retail gasoline prices reflect the crude oil costs paid by refiners, particularly those on the Gulf Coast, who typically pay Brent-linked rates. As a result, prices at the pump tend to follow Brent crude rather than WTI.

As of Friday, Brent crude oil was trading near $100 per barrel, a 38% jump from $73 before the conflict began, according to FactSet data.

The Journey from Crude Oil to Gasoline

Gasoline starts as crude oil, which is extracted, transported to refineries, and processed into fuel. Once refined, gasoline is moved via pipelines to storage terminals, then delivered by tanker trucks to local gas stations.

Stations purchase fuel at prevailing market prices and set their own retail prices, factoring in operational expenses and desired profit margins. According to De Haan, gas stations typically earn between 30 and 35 cents per gallon sold.

When oil prices surge, stations often see their profit margins shrink due to higher costs. Conversely, when oil prices drop, stations may benefit from wider margins.

On Friday, the national average for a gallon of gasoline stood at $3.63, based on AAA data.

Key Factors That Shape Gas Prices

• Crude Oil: According to the EIA, the cost of crude oil makes up about 51% of the price of a gallon of gas, making it the most significant factor.
• Refining: Turning crude oil into gasoline and other products accounts for roughly 20% of the total price. This process also produces jet fuel and heating oil. Learn more about petroleum products.
• Marketing and Distribution: The costs of transporting fuel and running gas stations contribute another 11% to the final price.

The Impact of Taxes

Taxes are the last major component of gas prices. The federal government charges 18.4 cents per gallon, which helps fund highway and infrastructure projects. State taxes vary widely, leading to differences in gas prices across state lines. On average, states levy about 34 cents per gallon, but this can range from 9 cents in Alaska to nearly 71 cents in California, according to a recent EIA analysis.

Seasonal Trends in Gas Prices

The time of year also affects what drivers pay at the pump. Starting in late winter, states begin switching to summer-blend gasoline, which is formulated to perform better in warm weather but is more expensive to produce. According to CBS News Minnesota, this seasonal blend typically adds about 15 cents per gallon to the price, and retailers are required to sell it from June 1 through September 15.

Demand for gasoline also rises in spring and summer, contributing to the usual uptick in prices as temperatures climb.

Related Coverage

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• Iran launches major attacks on Day 13 of the war
• Experts discuss the Strait of Hormuz and its effect on gas prices