Petrol (gasoline) prices in the United States have surged sharply since the start of the Iran war, with the average price of regular fuel climbing to $4.48 per gallon, up 31 cents in the past week alone, according to AP citing AAA.
Fuel prices are now about 50 per cent higher than before the conflict began, driven mainly by disruptions in global oil supplies linked to the closure of the Strait of Hormuz. The narrow waterway, through which around a fifth of the world's crude oil normally passes, has remained severely constrained, leaving oil tankers stranded and pushing up global crude prices.
Initial Optimism Fades as Conflict Drags On
After the announcement of the initial ceasefire, there was optimism that this could be the beginning of the end of the conflict, said Rob Smith, director of global fuel retail at S&P Global Energy. Consequently, crude prices came down, gasoline spot prices followed, and retailers lowered prices as well.
However, as the conflict dragged on, gasoline prices resumed their climb. Smith noted that there is a fundamental shortfall that will exist globally, or a fundamental struggle to meet demand, which will drive up prices. No matter what a government says or what any market person thinks, there is a true upward pressure being exerted on prices every day the Strait of Hormuz is constrained. And it is still severely constrained.
Crude Oil Accounts for Half of Gasoline Price
According to the US Energy Information Administration (EIA), crude oil accounts for around 51 per cent of the price of a gallon of gasoline in the US. The effective shutdown of Hormuz triggered what the International Energy Agency described as the largest supply disruption in oil market history, sending crude prices above $112 a barrel in early April.
Bob Kleinberg, adjunct senior research scholar at Columbia University's Center on Global Energy Policy, said gasoline prices closely tracked crude oil movements. Not much of a mystery here, Kleinberg said. It's not exactly proportional but the shape of the curves follows the same pattern, and really with very little delay.
US Block on Iranian Oil Exports a Key Factor
Analysts also pointed to the US move in April to block Iranian oil exports as a key trigger for renewed price increases. Iran had been moving an unusually high amount of oil to global markets, so that was helping moderate prices, said Jim Krane, energy research fellow at Rice University's Baker Institute. The Trump administration decides they're going to punish Iran, and try to put more pressure on Iran by blocking their exports, so of course that does put pressure on Iran, but also puts pressure on global oil prices and forces them up. That was probably a big factor.
The report noted that fuel prices remain highly sensitive to developments in the Middle East, including attacks on shipping routes and diplomatic negotiations. The oil market is exquisitely sensitive to what's coming out of the White House, Kleinberg said.
Experts Warn of Prolonged High Prices
Experts cautioned that even if the conflict eases, fuel prices may remain elevated for months due to lingering supply risks and higher insurance costs for shipments through the Gulf region. Even if there was a true and lasting resolution of the conflict, both sides agree to play nice and truly do commit to keeping Hormuz open, it will still take months to get back to what it was pre-war, if not even longer, Smith said.
