Last Updated May 9, 2018 6:58 AM EDT
With the U.S. abandoning the Iran deal, Americans can prepare for higher prices at the gas pump -- and a hit to everything from airline tickets to the cost of package delivery.
Between the time President Donald Trump started 2018 tweeting about theand the time he officially pulled the U.S. out of the agreement, prices of crude oil and gasoline have steadily risen. Oil surged early Wednesday to its highest prices in more than 3 years.
Those rising costs could act as a damper on economic growth, canceling out nearly half of the GDP boost expected from last year's tax cut, according to one analysis. Meanwhile, costlier gasoline has already eaten up a good chunk of the money Americans saved from the tax cuts.
"For the U.S. economy, a prolonged rise in oil prices could reverse part of the benefits from the fiscal stimulus," wrote Gregory Daco, head of U.S. economics at Oxford Economics, in a research note. Oxford estimated a GDP boost of 0.7 percentage points from the tax cuts, but if oil stays at the price it was Monday, "this could offset half of the fiscal boost in 2018," he wrote.
At the pump, gasoline prices have risen 15 cents since the start of April, according to price tracker GasBuddy. "The potential exists the national average could go over $3 a gallon," said Patrick DeHaan, GasBuddy's head of petroleum analysis.
Other factors are in play, including oil inventories in the U.S. dropping significantly while global demand for oil increases. The price of a barrel of crude has increased 50 percent in a year, said Dan McTeague, senior petroleum analyst at GasBuddy.
"It's a significant increase, and I don't think anyone expected that geopolitical events … would have such an impact on pushing prices up," he said.
These geopolitical events are particularly ill-timed as they come at the start of summer driving season, when more costly summer-grade gasoline normally pushes up prices. In fact, the increase in gas prices since the start of the year has already wiped out one-third of the savings Americans achieved from last year's tax reform bill, according to an estimate from Morgan Stanley.
By reducing the amount of income consumers have to spend, the price of gas "'steals' about an annualized $38 [billion] in spending from elsewhere," analysts at the investment bank wrote in a note.
Just as they reduce consumer spending, high gas prices can also cut into spending by businesses or cause them to pass on their higher costs to consumers. "It's going to be a whammy for transportation: FedEx, UPS, all will be faced with higher prices. That will trickle down," said GasBuddy's DeHaan. "It's going to mean higher costs for Amazon to make those deliveries."
While the reimposed Iran sanctions won't be effective for 90 to 180 days from today, according to the Treasury, much of the worst-case scenario has already been baked into oil prices, which closed slightly lower on Tuesday.
And many details remain unknown. As the world's fifth-largest oil producer, Iran produces 3 million barrels per day, which it sells largely to Europe, China, Japan and South Korea. Analysts expect a reduction of about 400,000 to 500,000 barrels per day -- much less than the million-barrel drop Iran experienced during the Obama administration.
The cut could also end up much smaller if other parties to the Iran deal don't comply with U.S. sanctions. European partners pressed hard for Mr. Trump to staying in the agreement. China, India and Russia are strongly opposed to a U.S. exit and "could decline to participate" in sanctions, analysts at B. Riley FBR wrote in a note.