“I could only read the news and scream into the void for so long,” remembered Colgan. “We all know the costs have gone up, but this helps make it concrete. Americans can see what it means for their household and for the country at large. And it lets people compare it with what could’ve been done with that money instead.”

At the time of writing, Americans have paid more than $71 billion in extra costs for gasoline and diesel since the war started.

“That’s [more than] twice the annual budget of NASA,” Colgan said. That’s more than the whole federal bridge repair and renovation program that Biden launched in 2024. The EV [electric vehicle] infrastructure plan proposed in the Inflation Reduction Act
in 2022 was only $18 billion.”

Given that the U.S. is a net exporter of oil, it might surprise consumers that energy costs have increased so dramatically. However, by increasing American
crude production, the country has created the very circumstance that left it vulnerable to the closing of the Strait of Hormuz.

“We were a net oil importer from about 1970 to 2020, and we had a ban on exporting crude abroad,” Colgan stated. “Now we’re a net exporter, and we lifted that ban in 2015 because, of course, companies could see they might want to sell [oil] abroad. It doesn’t cost that much to ship barrels of oil anywhere. So if American companies can get the best cost for oil in Asia, that’s where they’ll send it.”

Before the Iran war began, the price of global crude oil was about $70 per barrel. During the conflict oil prices have risen past $120 per barrel—thus, the incentive for U.S. oil companies to export oil, lowering the U.S. supply.

“The global oil market is essentially one big bathtub. Things are just too tightly integrated to truly be independent, so even when you are a net exporter like we are, you can’t be isolated from price shocks [like those we are experiencing now].”

Lifting the export ban on crude oil did have upsides. Besides generating significant profits for American oil and gas companies, it allowed European nations to reduce their consumption of Russian gas, distancing Europe from Russia as it started to attack Ukraine.

But during this energy crisis, to lower costs for consumers, why not lower the tax on gas or have what’s known as a gas-tax holiday? Colgan rejects that approach.

“I would much rather see a windfall tax on American oil companies,” Colgan said, rather than lower taxes for consumers. “Take some large share and do a dividend to Americans on a straight per-capita level. The [requirements of] people who really need the money to offset higher prices can be balanced. Then we [would] probably still have money left over to say, ‘We are going to improve our public infrastructure, our public transport, so next time this happens, we won’t need to intervene like this.’”

While the cost of diesel and gas might be the easiest expense for American consumers to see, it is hardly the only consequence of the war in Iran. Fuel costs drive up prices across multiple sectors that impact people’s lives regularly.

“First, there are more things that come out of a barrel of oil, right, like jet fuel and naphtha and petrochemicals. All of them go up in price,” Colgan explained. “That affects fertilizer costs, [and those] increases lead to higher food prices. Then you have to factor in the increased cost of shipping anything, whether it is to your door or to stores in your area. That is like a ripple effect throughout the American economy.”

Energy Shocks

In the past, prolonged price shocks, restricted oil supplies, and the cascading consequences they set off have led to innovation. The Organization of Arab Petroleum Exporting Countries embargo, in 1973, led to research and development into solar, wind, and nuclear energy. High supply constraints have led to investments into the supply chain and to the adoption of electric vehicles.

While the crisis stemming from the war in Iran might lead to new innovations internationally, Colgan is skeptical that the U.S. will be among the countries leading the way or benefiting.

“We are seeing growth in electric vehicles [and] for that matter, electric bikes, and a whole lot of other transportation solutions in the rest of the world. However, we are blunting our incentive for innovation with our tariff walls.”

Regardless of any innovations stemming from the energy shocks, Colgan doubts the demand for fossil fuels will decline, or that the world’s nations can adequately address the environmental impact of using fossil fuels.

“It’s not like anyone can say, ‘Oh, we’re having a war, so we are going to change everything tomorrow,’” he acknowledged. “It’s always going to take decades to shift [demand].”

Colgan argues that U.S. consumers will still face economic fallout from the war for the foreseeable future. Fuel prices may fall, he said, but their impact on the economy and international relations will continue to echo.

At publication, the conflict continues despite both the U.S. and Iran having signed a Memorandum of Understanding. The Strait of Hormuz remains closed, and questions linger over whether ships will have free run of the waterways when it opens. Discussions about Iran’s nuclear program are ongoing.