Pain at the Pump: $130 Billion and Counting

Pain at the Pump: $130 Billion and Counting Increased fuel costs from the Iran war now exceed $1,000 per U.S. household, according to Brown University calculations. It has now been more than seven months since the Iran war started, and half of U.S. adults are “very concerned” or “extremely concerned” about being able to afford gasoline. Trump has consistently downplayed the economic fallout from the Iran war, using his now favorite phrase, “small price to pay.” But of course, as the old saying goes, “a billion here, a billion there, and pretty soon you’re talking about real money.” According to Brown University’s Iran War Energy Cost Tracker (IWECT), increased fuel costs for U.S. consumers since the beginning of the Iran war now exceed $130 billion, equivalent to more than $1,000 on average per household. For most households that is definitely not a small price to pay. For today’s post, I want to dig into the IWECT. I know that gasoline and diesel prices are up sharply, but I want to better understand the methodology behind the IWECT. What are the key assumptions? Are these assumptions reasonable? What do these calculations include and not include? IWECT Explainer The goal of the IWECT is to measure the U.S. consumer burden from elevated gasoline and diesel prices since the Iran war began. There are, of course, many other costs to the war (for example, military spending), but the objective of this tracker is to measure energy costs. The IWECT is sharply focused on consumer costs, so does not attempt to measure impacts for U.S. oil producers or refineries. Higher prices mean higher revenues for these companies, and large gains for shareholders, but this is not the focus of the IWECT, and is mostly irrelevant for the many millions of U.S. households who are concerned about being able to afford gasoline and diesel. The IWECT covers gasoline and diesel. As of October 12, the IWECT calculates increased costs of $73 billion and $60 billion for gasoline and diesel, respectively. They could have also included LPG, petroleum coke, and all the other refined products, but these markets tend to be much smaller, so I like the approach of focusing on the two most important markets. If they were to include one more refined product, my vote would be jet fuel. Including jet fuel would require more assumptions, but after gasoline and diesel, jet fuel is the third largest refinery output by volume, and high jet fuel prices are leading to large increases in airfares. Not quite pain at the pump; more like agony at the airport. Prices The IWECT starts by calculating the difference between actual fuel prices and what prices would have been without the Iran war. This is done day-by-day and separately for diesel and gasoline. Actual Price – Counterfactual Price Collecting actual prices is pretty easy. The IWECT collects gasoline and diesel prices from https://gasprices.aaa.com/. AAA has been reporting average retail fuel prices for a long time and this provides an up-to-date daily measure of U.S. gasoline and diesel prices. The counterfactual price is hard. What would gasoline and diesel prices have been without the Iran war? For this, they use the actual AAA price as of February 28, 2026, the day the Iran war began, adjusted for seasonal variation. To their credit, the IWECT website is upfront about this being a strong assumption. They write, “There is no perfect way to do this, as oil prices are inherently volatile. Still, in the 12 months prior to the start of the war, crude oil prices had been relatively stable in the range of $60–70/barrel.” The challenge arises not only because of volatility, but because the IWECT attributes all changes in gasoline and diesel prices over the last seven months to the Iran war. There are many examples of why that is not quite right. For example, recently Ukraine attacked Russia’s oil refineries, further reducing supply. As another example, the UAE announced in April that it was leaving OPEC, likely increasing supply. My point is not to make a list of all the other factors that push up and down petroleum prices, but to emphasize that, particularly as more time passes, it becomes harder to know what prices would have been without the Iran war. Using this approach, the IWECT calculates that as of October 12, gasoline and diesel prices in the United States are $1.37 and $2.60 higher per gallon, respectively, than they would have been without the war. This is much more than the increase in crude oil prices alone (about $30 per barrel, or roughly $0.75 per gallon); it also reflects refining and other constraints. Quantities The IWECT then calculates consumer burden by multiplying these price differences by the quantity of each fuel consumed. Again this is done day-by-day and separately for diesel and gasoline. Consumer Burden = (Actual Price – Counterfactual Price) × Gallons Consumed Data on gasoline and diesel consumption come from the Energy Information Administration, and reflect average U.S. national consumption 2021–2025 for “motor gasoline” and “distillate fuel oil”. The former is 2.3 times larger than the latter. I like this. The categories are broad. For gasoline, this includes all octane grades (regular, premium, etc.) and all different types of blends (e.g. CARBOB). For diesel, this includes diesel for transportation as well as heating oil. Most diesel in the United States is used by trucking companies, farms, railroads and other industrial/commercial consumers, not by households directly. The IWECT is aware of this, writing, “Increased fuel costs result in higher prices for consumers, whether they pay it directly at the pump or not.” I think this is mostly correct, with higher diesel prices pushing up prices for food, retail goods, and everything else that is made and transported using diesel. But this is another strong assumption, and consequential, because diesel accounts for a large share of the total consumer burden. I also mostly like the decision to use the historical five-year average, and appreciate its simplicity. A more complete calculation would incorporate the price elasticity of demand. Already there is growing evidence that U.S. fuel consumption will be somewhat lower in 2026, due to higher prices. By not accounting for this demand elasticity, the IWECT modestly overstates the consumer burden. But again, I appreciate the simplicity and transparency of the IWECT calculations and my sense is that the assumptions about prices are probably more consequential than the assumptions about quantities. Conclusion Without question, the IWECT makes some strong assumptions. But overall, I quite like it. They are upfront about the assumptions and the calculations are simple, transparent, and well documented. The website includes a careful explanation of all data sources, and an email (climate-solutions@brown.edu) where you can contact them if you have questions. The IWECT does not capture everything (e.g. jet fuel), but it includes a lot. In the end, I think U.S. adults are correct to be concerned about fuel prices. Futures prices for crude oil are below current global oil prices, but well above where they were before the war. Moreover, the war has exposed refining constraints that have led to even sharper increases for gasoline, diesel, and jet fuel. Trump started the war saying oil would be “a little high” for “a little while”. But as the IWECT makes clear, there is nothing little about the growing consumer burden from the Iran war. Follow us on Bluesky, LinkedIn, and our new Instagram. Also subscribe to our email list to keep up with future content and announcements. Suggested citation: Davis, Lucas. “Pain at the Pump: $130 Billion and Counting” Energy Institute Blog, October 12, 2026. Categories Lucas Davis View All Lucas Davis is the Jeffrey A. Jacobs Distinguished Professor in Business and Technology at the Haas School of Business at the University of California, Berkeley. He is a Faculty Affiliate at the Energy Institute at Haas, a coeditor at the American Economic Journal: Economic Policy, and a Research Associate at the National Bureau of Economic Research. He received a BA from Amherst College and a PhD in Economics from the University of Wisconsin. His research focuses on energy and environmental markets, and in particular, on electricity and natural gas regulation, pricing in competitive and non-competitive markets, and the economic and business impacts of environmental policy.