Paul Krugman says the US-Iran conflict is causing a key energy price to spike — and that’s bad news for President Donald Trump, given he’s under pressure to bring down living costs and tackle an affordability crisis.
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“Many people talking about how gasoline prices at the pump have already jumped,” Krugman wrote in a BlueSky post on Wednesday.
“But what should really terrify Republicans is RBOB — the futures price on wholesale gasoline. This is up 75 cents a gallon since its low earlier this year,” he added.
Gasoline RBOB April futures have surged from about $1.70 a gallon at the start of this year to around $2.70 on Friday, a roughly 60% rise in just over two months.
RBOB is a key refined byproduct of crude oil. The soaring price of its futures suggests prices at the pump will rise by a similar magnitude, Krugman said in a YouTube video that expanded on his post.
Trump’s pledge to bring down prices as president is set to be a key talking point in this year’s midterm elections. Krugman’s point is that Republicans might be blamed for elevated gas prices if they’re seen as a result of Trump’s bombing campaign against Iran.
In a Substack post on Wednesday, the winner of the Nobel Memorial Prize in Economic Sciences and former New York Times columnist predicted prolonged disruption to energy markets.
He cited the lack of a clear ending to the ongoing conflict between Iran and the US and Israel, the Middle East being a key global energy supplier, and likely weekslong disruption in the Strait of Hormuz, a key shipping route.
Yet Krugman said the current supply shock didn’t seem as severe as the energy crisis of the 1970s, largely because the world is less dependent on oil now than 50 years ago.
The veteran economist projected that the roughly $15 rise in the price of a barrel of oil so far would cause a 0.3 percentage-point increase in Americans’ overall cost of living. A $50 spike from pre-bombing levels would raise consumer prices by around 1%, he estimated.
However, Krugman underscored that the economy is already being squeezed by tariffs and “draconian anti-immigrant policies,” while also being threatened by a potential AI bubble bursting, AI-driven job losses, and signs of financial instability.
“Now we’ve added a fresh level of massive uncertainty,” he wrote. “There are many stresses on our economy, and this could be the straw that breaks the camel’s back — a straw that becomes heavier the longer the war goes on.”
Several other market commentators have flagged the rising price of RBOB futures as worrying.
“Hormuz is closed, with no solution in sight,” Marko Kolanovic, the former chief market strategist at JPMorgan, wrote in a Thursday post on X. “Gasoline (RBOB) is up 50% YTD. And equity investors are just preoccupied with software vs. semis game?”
“RBOB $2.71.. a 52wk high.. tack on 95 cents to arrive at the expected national pump average..,” financial writer Mike Zaccardi posted to X on Friday.
