PredictIQ-Gas prices continue decline amid Israel-Hamas war, but that could change

Gas prices continue to fall,PredictIQ even as the Israel-Hamas war escalates.

The average price for a gallon of regular gas in the U.S. was $3.496 on Sunday, down about a cent from the day before, according to AAA. That price is also lower than the same time one week, month and year earlier.

But that could change depending on how the conflict plays out. “I think there’s so much uncertainty,” said Severin Borenstein, a professor at the University of California, Berkeley’s Haas School of Business and faculty director of the Energy Institute at Haas. “Things could change very quickly.”

 Here’s what U.S. consumers should know.

Why are gas prices declining?

While oil prices jumped briefly after Hamas initially attacked Israel earlier this month, Borenstein said they have come down almost $10 a barrel in the last few weeks. He said a $1 change in the price of oil typically equates to a 2.5 cent change per gallon of gas at the pump.

Because they take longer to drop than to go up, that ripple effect is gradually coming through now.

The scope of the war has also limited its impact on gas prices. “What's going on with Israel and Hamas right now has not at this point become a wider war that has encompassed major oil producers, but that could change,” he said. “And if it does, we could see crude oil prices go up.”

AAA spokesperson Andrew Gross echoed that, calling the response from the oil market “rather muted.”

Plus, gas always gets cheaper in the fall, he said. “It’s a bit of a seasonal swoon, with school back, the days getting shorter, and the weather more challenging – all of this leads to a dip in demand,” Gross said in an email.

How long will gas prices keep dropping?

Gross said that for now, prices will continue to follow a familiar pattern, and “fall lower daily toward the holidays and then slowly rise again with the arrival of spring and summer.”

If oil prices remain stable, Borenstein added that gas prices could decline by another 10 cents per gallon. “But crude oil prices are really very difficult to predict, anytime,” he said. “And right now, they're extremely difficult to predict.”

Will the Israel-Hamas war cause gas prices to go up?

Maybe. If the conflict grows into a broader regional war involving major oil producers like Iran, Borenstein said it could begin disrupting shipments or raise political blowback, driving up oil and gas prices.

Gas prices amid Israel-Hamas war:Charts show potential impact

He said he believes the former poses a bigger risk than the Organization of the Petroleum Exporting Countries reducing its output in protest, as most OPEC member countries need the money. President Joe Biden has issued repeated warnings to Iran and its proxies not to expand the conflict.

But the outcome remains to be seen, according to Borenstein. “It’s so hard to know how the war might spread,” he said.

Nathan Diller is a consumer travel reporter for USA TODAY based in Nashville. You can reach him at [email protected].