Gasoline prices in the United States have climbed above $4 a gallon for the first time in more than three years, as the oil supply shock triggered by war in the Middle East quickly drives up costs for families.
Pump prices hit a national average of $4.018, the highest level since August 2022, when Russia’s war with Ukraine roiled energy markets, travel association AAA said. Gas prices have soared more than 30% since the United States and Israel attacked Iran in late February, according to AAA data.
“We anticipate the potential for disruption to the U.S. fuel supply,” Lee Zeldin, director of the Environmental Protection Agency, told reporters at S&P Global’s CERAWeek conference in Houston last week. THE EPA temporarily lifts some regulations to increase gas supplies in order to lower prices.
vice-president J.D. Vance told consumers they face “a tough road ahead” regarding gas prices in the coming weeks. Vance promised the spike was temporary and prices will fall after the end of the war.
“We have a problem, we know we have a problem and we are doing everything we can to solve it,” the vice president said at an event in Auburn Hills, Michigan, on March 18.
Oil prices have jumped more than 50% since the start of the war. Prices of Brent, the international benchmark, are poised for a record monthly rise dating back to the futures contract’s inception in 1988. U.S. crude oil is heading for its biggest single-month rise since 2020.
The average monthly gas price in March is expected to be 25% higher than in February, said David Doyle, head of economics at Macquarie Group. This would be the largest monthly increase since October 1990, Doyle told clients in a March 25 memo.
Diesel prices are soaringDiesel prices, meanwhile, crossed $5 a gallon on March 17, and are currently more than 40% higher than before the conflict. This has broad implications for the U.S. economy. The fuel is used by trucks and freight trains that transport goods to markets.
“The consumer has already seen the shock of rising gasoline prices and increased airline ticket prices due to the rising cost of jet fuel,” Andy Lipow, president of Lipow Oil Associates, told clients in a March 20 memo.
“However, the full effects of rising diesel prices have not yet been felt and this will impact the economy in the coming months,” Lipow said.
Consumers could see the impact by April through higher prices at supermarkets and for their online orders, said Patrick De Haan, head of petroleum analysis at GasBuddy. “This will very quickly trigger additional inflation,” the analyst said on March 20.
Energy Secretary Chris Wright told CNBC last week that the administration is considering increasing diesel supplies.
“We have some ideas on diesel that we could bring more diesel to market,” Wright told CNBC. Brian Sullivan in an interview in Houston. “I think we’ll see that happen before long.”
Oil prices have soared because tanker traffic through the Strait of Hormuz has plummeted due to Iranian attacks. The strait is the most important sea route for oil exports in the world. Before the war, about 20% of the world’s oil reserves passed through the waterway.
Oil producers in Gulf Arab countries have cut production because they are running out of space to store crude while the strait remains effectively closed. This led to biggest disruption to oil supply in history, according to the International Energy Agency.
Trump’s actionsThe Trump administration has taken several steps to curb price increases. It is unclear whether the measures will provide relief to consumers given the scale of the disruption. Analysts say oil must start crossing the strait again for prices to fall.
“The president doesn’t have a lot of levers,” De Haan said.
The EPA has temporarily lifted restrictions on the sale of E15 gas, a fuel blend containing 15% ethanol. The sale of E15 is restricted in about half of the United States during the summer months due to air pollution regulations.
The waiver goes into effect May 1 and will last until May 20, but it could be extended, Zeldin said.
“We will continue to monitor supply with industry and federal partners,” the EPA administrator told reporters March 25 in Houston. “The agency will be prepared to extend emergency fuel waivers as ongoing issues continue to require action.”
United States also releases 172 million barrels of oil from its strategic oil reserve. The action is part of a coordinated effort by more than 30 countries to inject 400 million barrels into the market to address the supply shock.
Asset waived strict shipping rules under the Jones Act for 60 days. The Jones Act requires U.S. ships to transport goods between domestic ports. Trump’s waiver of these rules would allow foreign ships to deliver oil and gas to the United States, which could reduce transportation costs.
The Jones Act waiver will make it easier to get gasoline to the West Coast and Northeast of the United States, but it won’t do much for other parts of the country, De Haan said.
Congress could suspend the federal fuel excise tax. That would save consumers about 18 cents per gallon on gasoline and 24 cents on diesel, Lipow said.
Gas prices could likely hit record highs of $5 a gallon if no one acts to eliminate the bottleneck in the Strait of Hormuz, De Haan said. “It’s kind of a race against time,” he said.