How the spike in gas prices could ripple through the global economy

William Brangham:

The steep rise in gas prices because of this war is the second largest spike in three decades, and it is hitting Americans' wallets. Many have told us how they're now scrambling to fill their own tanks.

Samantha Lott, Texas Resident:

My name is Samantha Lott. I currently live in Denton, Texas.

Jim Lawrence, Nebraska Resident:

I'm Jim Lawrence. I live in Omaha, Nebraska.

Alexis Mims, Texas Resident:

My name is Alexis Mims.

Jamie Pardau, Hawaii Resident:

My name is Jamie Pardau. And I live in Kailua-Kona, Hawaii.

Jonathan Tipton Meyers, California Resident:

I'm Jonathan Tipton Meyers. I'm a full-time rideshare driver.

As soon as this war started, gasoline prices jumped up minimum 50 cents, but in certain areas it was a dollar as well too.

Jamie Pardau:

My husband and I are making an effort to combine any trips that we take into town or to stores, so that we aren't driving unnecessarily. I don't think it ever occurred to me that our gas would be over $5 a gallon.

Alexis Mims:

We are -- we are struggling. Now it's not just the groceries that are expensive, but now it's the gas that is out of control.

Samantha Lott:

I am a community mental health social worker. As I'm sure you know, I do not make a lot of money. And so having to use my own car and drive a lot around two different counties, I'm buying a lot of gas. Then, in order to make ends meet as well, I have to deliver groceries on the side in the evenings and the weekends.

I'm filling up my tank every other day, and I'm having to pay like $40 to $50 to do so. Any money that I get from my daytime job is usually a month late for reimbursement. And so I'm having to figure out how to make that money stretch and like what kind of food am I going to eat this month, that type of thing.

It's really anxiety-ridden right now times for me and a lot of other people, especially people that are single and are having to pay all of their household costs themselves. It's really difficult.

Jim Lawrence:

Right now, my income is tied to the market. So, it's in my retirement accounts. And so with the volatility of gas goes the volatility of the market, and one goes up, and your bank balance goes down, and that really is the most concerning thing about the future. All of this needs to stabilize.

Jamie Pardau:

In Hawaii, so much of what we have purchased in the stores is imported, and so it isn't really just the cost of gas that is going to impact our community. It's going to be the cost of just about everything.

Jonathan Tipton Meyers:

We're constantly trying to calculate whether a ride can actually be profitable for us. So if you add on an increased gas price, it just makes making those decisions even more difficult. And at the end of the month, that's a significant raise in your actual price, in your anxiety, in your ability to drive safely and maintain your car and do your job.

Alexis Mims:

My son is three hours away in college, and my daughter is 30 minutes away. The amount of gas is too much to go ahead and travel at this time, so we are forgoing plans for any type of get-togethers. But, thankfully, we have modern technology, so for now we just keep in touch that way.

Samantha Lott:

I don't really do a lot of things other than work, just because I can't afford to, and that's really sad, because in order to have a well-balanced life, people need to be able to go do things, support local businesses, hang out with their friends. And those are kind of luxuries at this point that I just truly can't afford.

William Brangham:

So how long are gas prices expected to stay high, and, more broadly, how bad a shock will this war deliver to the global economy?

For that, we turn again to Cliff Kupchan. He is chairman of the Eurasia Group, which is an international consulting firm.

Cliff, so good to have you back on the "News Hour."

So you have heard from these people about how difficult it is for them just to fill their tanks. Gas is over $4 a gallon, Brent crude at over 118 a barrel. If this war continues, as the president said tonight, even for a couple more weeks or maybe longer, how much worse could this get?

Cliff Kupchan, Research Director, Eurasia Group:

It could get a lot worse.

The Strait of Hormuz is so critical to the international economy, for oil, for LNG, for helium, for chips, for food, for fertilizer. It is just a choke point for the international economy. I don't think that, for the foreseeable future -- I think this war, I think, is going to get worse.

Judge President Trump by his actions, which is sending more equipment to the Gulf, not by something he might have said today about caring about opening the Gulf. So I think this is going to be a stranglehold on the economy. It's going to rise prices and raise prices in many sectors and stoke inflation in countries around the world. It's a real problem.

William Brangham:

You touched on a few of those other products that come through the Gulf. Apart from energy supplies, what other industries will those mostly affect?

Cliff Kupchan:

Well, again, helium, which is critical to making advanced chips for A.I., aluminum, petrochemicals, fertilizer, and food prices. Those are the main ones. But that's a whole lot.

And especially for countries that import food, it's going to be a real battle to keep the books balanced and to keep inflation under control.

William Brangham:

Do you think that consumers, or maybe even more importantly, the market has taken on board this idea that this could get so much worse?

Cliff Kupchan:

No.

Unfortunately, I think that markets, which I can speak to -- I don't -- consumers is more broad, but markets have had their head in the sand. I think markets still have their head in the sand. The market rally today, in part on President Trump's comments that he could end the war without opening the Strait of Hormuz, that's just really wishful thinking.

President Trump also sent a third aircraft carrier to the Gulf today. He's sending more troops to the Gulf. It's -- I think markets are in denial that there's a strong chance we get ground forces in Iran and that prices go up even further towards the $130 level, $130 a barrel for Brent.

It's going to get bad.

William Brangham:

Do you really believe, judging by what you're saying, that this conflict will escalate, that, despite what the president has been saying...

Cliff Kupchan:

I do. I do.

President Trump has -- again, I'm not going to put a judgment on it, but he's now attacked Iran twice in the middle of ongoing negotiations. I think that, as an analyst, it's just not useful to track his day-to-day words. It's much more useful to track the administration's day-to-day movements, which is putting men and a whole lot of metal and hardware into the region.

So I -- yes, I think it's going to get worse. It may not gone more than two or three weeks, but I think we're going to see a lot of combat and bombing before then.

William Brangham:

The president again reiterated this point that, if nations are not willing to help reopen the strait and they're thirsty for more oil, that they ought to just buy that oil from the United States. Is that a realistic exchange?

Cliff Kupchan:

No.

Global markets are -- energy is a global market. It's fungible. Barrels are interchangeable. Energy prices are going to stay high as long as the Strait of Hormuz is closed, and alternative sources are hard to come by, especially for LNG. So the president's comments really don't speak to how energy markets work, unfortunately.

William Brangham:

All right, that is Cliff Kupchan of the Eurasia Group.

Always great to hear from you. Thank you so much for being here.

Cliff Kupchan:

Thank you, sir.