We wrote about this earlier in the year, when the Brown University analysis put the additional fuel bill for American consumers at $40 billion and counting since the United States and Israel attacked Iran on 28 February. We wrote about the oil companies posting combined profits approaching $94 billion in 2026. We noted that governments levying percentage taxes on fuel collect more revenue every single time the pump price rises, without changing a single line of tax code. The mechanism was clear then. It has not changed.
What has changed is that the numbers have got worse.
Gasoline prices in the United States are up more than 28 per cent compared to a year ago according to the Labor Department, with the national average sitting above $4.50 a gallon. In California it has touched $5.20. UK pump prices have followed the same trajectory. Crude oil surged past $110 a barrel in the days after the war began. Goldman Sachs projected it would peak at $140 in an extended disruption scenario. The Strait of Hormuz, through which around 20 per cent of the world's seaborne oil moves, has been effectively closed since the opening weeks of the conflict. Oil that was getting to market cheaply is now not getting there at all, or is taking longer routes that cost more, and those costs are passed directly to the person filling their tank.
The American consumer price index rose 3.8 per cent from April 2025, the largest annual jump in three years. On a single month basis, prices rose 0.6 per cent from March to April, with gasoline up 5.4 per cent in that one month alone. Grocery prices rose 0.7 per cent in the same period. Morgan Stanley's analysts have noted that a 10 per cent increase in oil prices adds around 0.35 per cent to headline consumer prices within three months. Oil is up more than that. The maths is not complicated.
This is where the biscuits and the chocolate bar come in. Because what looks like a fuel story is not only a fuel story. The diesel that carries the biscuits from the factory to the distribution centre to the supermarket costs more. The fertiliser used to grow the wheat costs more, because the Strait of Hormuz is also a conduit for agricultural inputs and its closure has pushed fertiliser prices up by an estimated 1.5 per cent, which flows directly into food prices. The electricity used to run the factory costs more. The packaging costs more because its production is energy intensive. By the time those biscuits reach the shelf, every step in their journey has been repriced upward, and the person at the end of the supply chain is your daughter, paying with an hour of her time.
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Oxford Economics forecasts 2026 will bring the slowest annual consumer spending growth since 2013, excluding the pandemic years. They noted that the rise in gasoline prices would more than offset the boost that higher tax refunds had been expected to provide. The war is consuming the economic headroom that existed before it.
The oil companies are not suffering. BP described its first quarter as exceptional. Shell has watered down its renewable energy commitments. The six largest Western oil companies are on course to earn close to $3,000 a second this year. Governments that take a percentage of fuel sales at the pump are collecting more revenue per litre than they were in January without doing anything differently. The financial infrastructure surrounding fossil fuels was positioned for this outcome before the first strike was ordered.
Nobody voted for it. Nobody was asked whether absorbing a permanent rise in the cost of everything was an acceptable trade for military action in the Middle East. The decision was made, the war is ongoing, there is no defined end point, and the people who benefit from high oil prices were perfectly placed to benefit from it the moment it began.
A chocolate bar used to be small change. The hour's work it now costs is the clearest measure of what has actually happened.
Sources
- Center for American Progress — The War in Iran Will Raise Fuel Prices and Costs Throughout the Economy
- PBS NewsHour — Iran war hits home as gasoline prices fuel significant U.S. inflation jump
- Fortune / AP — Your grocery bill, gas tank, and heating bill are all about to get more expensive
- Goldman Sachs analysis via AOL — Iran war could push inflation higher this year
- Yahoo Finance / Oxford Economics — Gas prices are just the start: Consumers will feel more pain from Iran war
- CBS News / Labor Department — CPI data: Inflation held steady in February before Iran war drove up gas prices
- Brown University Watson Institute — The U.S. Energy Cost of the Iran War
- GaukMotorBuzz prior coverage — You're Paying $40 Billion Extra at the Pump. Someone Else Is Counting It as Profit.
