EAST LANSING, Mich. – As Americans face rising prices, Anderson Economic Group has completed a new analysis detailing how the conflict with Iran is driving up everyday costs for U.S. households.
Gasoline costs are the most immediately visible consumer impacts, while food shows important but less visible effects.
AEG’s analysis shows gasoline prices have increased by 38%. Using estimates of how crude oil prices affect retail gasoline, AEG’s model closely matches recent trends. Average U.S. prices have climbed from about $3 to $4 per gallon, meaning a typical two-car family using 100 gallons per month now pays about $100 more monthly, or $1,200 more per year.
Analysis by AEG estimated increases in food prices of roughly 2%, attributable to changes in natural gas and gasoline prices. This means that households spend about $200 more per year on food. A 2% increase is significant in terms of inflation, as in February 2026, the U.S. Personal Consumption Expenditures price index indicated inflation of about 3%, so an additional 2% increase over the next year or two would accelerate food inflation by a large margin.
“Rising gas prices tend to push up retail food prices because higher transportation costs ripple through the supply chain,” said Max Melstrom, Ph.D., AEG-affiliated expert and Loyola University Chicago associate professor. “The effect is largest for less-processed goods like produce, where transportation is a bigger share of the final price.”
AEG used an economic model that traces how energy prices move through the supply chain. This model accounts for how oil prices feed into gasoline prices, and how natural gas prices feed into fertilizer costs, which in turn affect farm production and retail food prices. At each stage, the model uses empirically based (i.e. real-world) cost shares and parameters from scholarly literature, until we get to the estimate of the final impact on consumers.
