Oil Prices Surge Past $100, Threatening Higher Costs for Consumers

Consumers may face additional financial strain as oil prices have surpassed $100 a barrel, driven by renewed fighting and military strikes impacting global oil supplies in the Middle East. This price increase marks a reversal from lower oil prices experienced in June when hostilities between the U.S. and Iran temporarily subsided. Brent crude, the international benchmark, had not reached $100 a barrel since May.

Businesses that produce and sell essential goods, including fresh food and school supplies, as well as those relying on fuel for shipping, reported cost increases following earlier spikes in energy prices after U.S. and Israeli actions against Iran. These companies are likely to pass on some of these escalated expenses to consumers.

"In general, once you have an increase in costs, businesses are fast in increasing the price," said Miguel Gomez, director of Cornell University’s Food Industry Management Program. He also noted that "it takes more time to lower prices when the costs go down."

Volatility in the Strait of Hormuz and broader regional instability have contributed to the rise in crude oil prices, the primary component of gasoline. This situation could lead to more expensive driving throughout the remainder of the summer, according to the motor club AAA. The average price for regular gasoline in the U.S. reached $4.09 per gallon on Thursday, a 15-cent increase from the previous week, with most states experiencing prices at or above $4.

"Given the typical lag along the oil industry’s supply chain, prices at the pump are poised to keep rising at least into next week," said Pavel Molchanov, investment strategy analyst at Raymond James. He added that futures prices for oil deliveries later this year and next year are lower, suggesting that prices might decrease once military actions conclude.

Despite higher gasoline prices, consumer demand for driving has remained robust, with gasoline consumption rising 1% to 8.9 million barrels per day last week, according to the U.S. Energy Information Administration.

Further pressure on gasoline prices could persist due to a reduced number of operational refineries, some of which have been damaged in the Middle East and Russia. This scarcity impacts the capacity to process crude oil.

Grocery prices are also expected to rise, as farmers depend on diesel fuel for agricultural equipment, and many food products are transported via trucks that require fuel. "Oil at $100 doesn’t make food prices jump right away, but it does put upward pressure across the food supply chains, especially for categories that depend heavily on trucking, cold storage and packaging," Gomez explained. Fresh produce and dairy products may be disproportionately affected due to the need for refrigeration during transit.

Imported goods are also vulnerable to increased shipping costs. "Things like olive oil that we produce very little here and are coming from mostly from Europe are going to be up," Gomez said. Albertsons, a grocery chain, recently lowered its 2026 fiscal outlook, citing pressures on its core grocery business and a slowdown in consumer spending.

Higher fuel expenses for shipping carriers, including trucking and air cargo, can directly impact consumers and businesses. Shipping services like UPS and FedEx have implemented fuel surcharges and other fees in response to rising fuel prices.

According to data from an AFS Logistics and TD Cowen Freight Index released July 14, truckload pricing has reached a four-year high, attributed to escalating fuel costs and capacity constraints. Andy Dyer, CEO of AFS Logistics, stated that diesel prices in the second quarter were approximately 51% higher than in January and February, while jet fuel prices increased by 90% compared to the previous year.

Dyer noted that "Beyond the direct impact of higher freight bills paid by shippers, these price movements also have second-order effects that squeeze rates higher." He further explained that smaller truckload carriers operating on thin margins might temporarily cease operations until fuel prices become more manageable.

Tractor Supply Co., a rural lifestyle retailer, reduced its annual sales forecast, partly due to higher fuel prices during its spring selling season, which adversely affected customer spending. CEO Hal Lawton mentioned that their customers, who often drive longer distances in diesel-powered pickup trucks, are particularly sensitive to elevated fuel costs. While customers continue to invest in essentials like pets, animals, farms, and properties, their shopping habits have become more deliberate, involving consolidated trips, prioritization of needs, and a more cautious approach to discretionary purchases.

The Footwear Distributors and Retailers of America trade group has warned that rising freight and material costs, coupled with increasing tariffs, present significant challenges for the footwear industry as companies prepare for the back-to-school shopping season and the remainder of the year. Matt Priest, CEO and president of the trade group, indicated that some members have reported a 25% increase in the cost of petroleum-based materials used in footwear manufacturing due to the conflict in the Middle East. These increased costs could eventually lead to an approximate 5% rise in the price of finished footwear products for consumers.

Footwear companies have been expediting inventory and imports in anticipation of potential new tariffs from the U.S. government, which has further strained shipping rates, according to Priest. "Container rates are spiking right now," he said.

Since the conflict began, airlines have responded to increased fuel costs by raising fares and additional fees, while also reducing flights or routes that are no longer profitable. These adjustments aim to protect airline margins but result in higher prices and fewer options for travelers, particularly in less competitive markets.

American Airlines reported a significant decrease in second-quarter net income, despite record revenue and strong spring travel demand. The airline attributed this to higher fuel costs, which, although partially offset by increased fares, were not entirely compensated for, leading to a lowered full-year outlook.

Despite rising prices, jet fuel demand has increased by 9% over the last four weeks compared to the same period last year, according to the EIA.