While oil prices have surged, the most immediate pressure on American drivers and flyers comes from a tightening global fuel supply chain. A blockage in the Strait of Hormuz, ongoing conflict in the Middle East, and recent attacks on Russian refineries have all reduced the amount of crude that can be turned into gasoline, diesel and jet fuel.
Global disruptions tighten supply
Refineries in the Middle East have been hit by attacks related to the Iran war, and those that remain operational face export bottlenecks because of the standoff in the Strait of Hormuz, where Iran and the United States are contesting control. In Russia, drone strikes launched by Ukraine have taken roughly 40% of refining capacity offline, representing about 3% of the world’s total capacity, according to Capital Economics. Moscow has responded by banning gas and diesel exports through January 2027.
China, another major fuel exporter, has curtailed its own oil imports to keep domestic prices down, while also limiting fuel exports to avoid shortages at home.
U.S. Gulf Coast refineries reap record margins
With the rest of the world’s refining hubs under strain, the United States—particularly the Gulf Coast—has become the primary source of refined fuel. The diesel crack spread, a key profitability metric that measures the difference between the price of crude oil and the price of diesel produced from it, jumped to $102 per barrel on a recent Monday, nearly three times pre‑war levels.
Industry analysts at Bank of America warned that the market is entering its strongest seasonal demand period with little margin for error. Companies such as Marathon Petroleum, Valero Energy and Phillips 66 have seen their shares more than double or rise sharply this year. Major integrated oil firms, including Chevron and ExxonMobil, have also posted booming earnings, with Exxon reporting roughly $160 million in profit per day for the last quarter.
Impact on consumers
Higher wholesale fuel costs are passing through to the pump. The national average for regular gasoline reached $4.07 per gallon, a 30% increase over the same month last year. Diesel, essential for farm equipment, trucks and trains, is up 48% year‑over‑year, adding an estimated $40 billion in extra costs for U.S. households since the conflict began, according to research from Brown University’s Climate Solutions Lab.
Jet fuel has risen more than 70% over the past year, prompting airlines to raise ticket and baggage fees while trimming less profitable routes. Analysts at Rystad Energy note that the pressure will continue to build at both the pump and the airport.
Future outlook
Analysts caution that the current profit surge may be temporary. The Gulf Coast is vulnerable to the upcoming hurricane season, and historically refineries slow production in the fall for maintenance. Bank of America predicts that unless supply issues in the Middle East, China or Russia are resolved, diesel prices will likely stay near current highs, with upside risk if inventories continue to be drawn down for winter heating.
Bob McNally, founder and president of Rapidan Energy Group and former energy adviser to President George W. Bush, said the market will remain “short” until either the Iran conflict eases or crude oil supply catches up with demand. He summed up the uncertainty: “Either Iran taps out or the president taps out. I couldn’t tell you which will come first.”
Original reporting: KRDO (Colorado Springs metro) — read the source article.
