Will gas hit $4? K-State economist breaks down the numbers

It may be months or even years before the long-term geopolitical ramifications of this weekend's airstrikes in Iran become clear, but a Kansas State University agricultural economist says gas prices are likely to spike in the coming weeks.

Gregg Ibendahl, associate professor of agricultural economics, specializes in agricultural production and finance, especially fuel pricing seasonality and impacts to the ag industry.

As a region, the Middle East is the world's leading producer of oil, and any uncertainty in the stability of the region's governments, economies and shipping capacity has typically resulted in price shocks, Ibendahl said.

Following airstrikes on Saturday that killed Iran's Supreme Leader Ayatollah Ali Khamenei and subsequent reciprocal strikes, crude oil futures had already risen 8%, from $67 per barrel on Friday to $72 on Monday morning.

What history suggests about pump prices

By analyzing 20 years of oil and gas price data, Ibendahl found that in the immediate term, gas prices typically go up about 2.4 cents per gallon for every $1 increase in oil's price per barrel.

"Prior to this weekend, U.S. regular gasoline averaged $2.98 per gallon nationally," Ibendahl said. "With the baseline $6 per barrel increase, prices could rise to between $3.10 and $3.16 within a month. Remember too, oil prices rose to $130 per barrel shortly after the Russian invasion of Ukraine, leading to gas prices of $5 per gallon."

Spikes in crude oil prices usually lead to a similar change in gasoline prices in the subsequent week, Ibendahl said. But crucially, crude oil movements can influence pump prices for more than a month, especially when uncertainty remains about the future stability of an oil-producing region.

Gas prices could climb even higher

Ibendahl's forecast, he pointed out, does not take into account other factors, such as extended violence or suspended traffic through the Strait of Hormuz — an Iranian-controlled 21-mile chokepoint through which about 20% of globally traded oil passes.

A shutdown of the strait could lead to oil prices that are well over $100 per barrel, or even more if warfare in the region starts targeting oil production facilities.

At that point, gas prices at the pump quickly start approaching $4 per gallon — or even more, if oil prices follow a similar trajectory to the aftermath of Russia's invasion of Ukraine.

"Longer term, the price increase could be 4.2 cents per gallon for every dollar per barrel," Ibendahl said. "While conflict may be occurring in the Persian Gulf, the resulting impact on gas prices will be felt at stations nationwide before the end of the month."