Gas Prices Rise to Point of Economic Damage

May 15 (UPI) -- With oil prices rising after President Trump's decision on Iran, gas prices are approaching a psychological threshold for most consumers, analysis shows.

Gas prices could be approaching a point of economic damage, but the worst-case scenario hasn't materialized yet.

Motor club AAA reports the national average retail price for a gallon of regular unleaded gasoline at $2.88 for Tuesday, about a penny higher than Monday, and six cents, or 2.3 percent, higher than this time last week.

Retail gasoline prices tend to follow movement in crude oil prices. Since U.S. President Donald Trump pulled out of the multilateral Iranian nuclear deal last week, the price for Brent crude oil, the global benchmark for the price of oil, is up more than 5.5 percent.

AAA spokeswoman Jeanette Casselano said Trump's decision, which could sideline about 1 million barrels of oil from a market with little spare capacity, and the switch to a summer blend of gasoline, which is more expensive to make, combine to make $3 per gallon gas likely.

"AAA predicts that the national average may reach $3 per gallon this summer, especially if crude oil prices continue to increase," she said in a statement.

The price for Brent crude up was up more than 1 percent in early Tuesday trading.

By market, drivers on the West Coast have the highest prices in the country, with Arizona the only state in the region below $3 per gallon. Federal data show the market is strained because of an increase in demand, with regional inventories of gasoline down nearly 700,000 barrels last week.

The Great Lakes market, meanwhile, is the most volatile with Ohio taking top honors with a 15 cent hike in gas prices from last week. Supplies there were a bit lower last week, but remain 1 million barrels higher than this time last year.

Patrick DeHaan, the senior petroleum analyst for GasBuddy, told UPI last year that $3 gas might be an economic tipping point. With the U.S. economy on steady ground for now, he said Tuesday that the new threshold might be $4 per gallon, with only minor changes in motorist behavior expected in the current market.

"Hardly any plans will be shelved, but some trimming is likely," he said.

Retail gasoline prices are up more than 60 percent since Trump took office and that could start to impact consumer spending habits. Analysis from Danish investment firm Saxo Bank said, however, that the worst-case scenario on consumer pocketbooks hasn't materialized yet.

"With a November midterm election looming, the Trump administration will do its best to avoid an unwanted spike in gasoline prices and can count on Saudi Arabia as the Kingdom has recently confirmed its commitment to stable oil prices around the threshold of $80 per barrel," Christopher Dembik, the head of macroanalysis at the bank, said in a statement.

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