Gas Prices Could Soar to $5, Analysts Warn

JPMorgan analysts have raised concerns that gas prices might soon reach $5 a gallon.

On Friday, they pointed out that the ongoing jet fuel crisis—spurred by major energy supply disruptions due to the war in Iran—has made this scenario increasingly likely.

Since the conflict began in late February, Brent crude oil has hovered around the $100 mark per barrel. Analysts, including Natasha Kaneva, noted that refiners are prioritizing jet fuel over gasoline and diesel.

Jet fuel has been particularly hard-hit as the blockade of the Strait of Hormuz hampers global energy trade, while damage in the Middle East raises concerns about sustained price increases.

Airline companies are warning that rising jet fuel prices might lead them to hike ticket prices, although some, like Spirit Airlines, have already increased checked baggage fees. Tragically, Spirit was forced out of business last weekend due to the soaring costs of jet fuel.

The JPMorgan team suggests that while refiners want to boost jet fuel production, that often results in decreased diesel output, creating a chain reaction that could negatively impact gasoline supplies.

“This likely helps explain why U.S. gas prices are at these levels,” according to the analysts, who noted current average prices are around $4.55 per gallon. They also emphasized the grave risk of reaching $5 per gallon.

As of Friday, AAA reported the national average for gas stood at $4.55 per gallon, marking a 52% increase compared to prices before the war—an increase of about $1.57.

The timing couldn’t be worse, noted JPMorgan, as the unofficial driving season kicks off on Memorial Day.

A recent University of Michigan survey revealed that consumer sentiment has plummeted to a record low of 48.2 in May, driven by concerns that rising gas prices will exacerbate inflation.

This marks a 3.2% drop from last month and a 7.7% decline from last year, with economists having projected a figure of 49.7.

The grim outlook stems from “growing worries about high prices affecting personal finances and the ability to make significant purchases,” said Joan Hsu, director of consumer research.

“Approximately a third of consumers spontaneously mentioned gasoline prices, while around 30% brought up tariffs. Overall, the pressure from rising costs is quite overwhelming,” Hsu noted.

“Until supply disruptions are completely resolved and energy prices come down, the situation in the Middle East is unlikely to improve significantly.”