Summary
- National average pump price $3.84/gallon, up 9.8 cents in a week
- Gasoline prices surged along with crude after truce collapsed
- Fewest tankers in two months transit the Strait of Hormuz
(Reuters) – Americans could soon see gasoline prices top $4 a gallon again as renewed hostilities between the U.S. and Iran have pushed energy prices higher by paralyzing traffic through the Strait of Hormuz, a critical route for global oil supplies.
The national average price of gasoline on Tuesday stood at $3.84 a gallon, up about 9.8 cents from a week ago, data from fuel price tracker GasBuddy showed. Gasoline prices are up 22.2% year-on-year.
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High pump prices have become a political headache for U.S. President Donald Trump and his Republican Party, which will soon be campaigning to hold onto thin majorities in the U.S. Congress in November midterm elections.
The $4 per gallon mark, a price point of financial pain for many consumers, was last crossed in late March, after Iran blocked the Strait of Hormuz. Prices eased below that threshold in June after the U.S. and Iran signed a memorandum of understanding to end the war.
A return to that level would add pressure on households already squeezed by inflation.
Prices of gasoline have surged alongside crude oil following the collapse of the truce between Washington and Tehran last week and reimposition of a U.S. naval blockade on Iran. Retail fuel prices and crude oil typically move in the same direction because crude feedstock is the dominant cost for producing the fuel.
The number of tankers transiting the Strait of Hormuz fell in the past day to the lowest level in two months, shipping data showed on Monday.
Before the Iran war about 20% of global oil supplies flowed through the strait.
Higher fuel prices have also been supported by the loss of Russian refining capacity due to Ukraine intensifying systematic attacks on energy infrastructure.
“I now expect the national average price of gasoline to reach $4 per gallon in the next 7-10 days, if not sooner, while the U.S. average diesel price is likely to again reach $5 per gallon by the end of this week, potentially as soon as Friday,” GasBuddy analyst Patrick De Haan wrote in a blog post on Monday.
Drivers in some states could see prices rise above the $4 a gallon mark sooner than that, De Haan added.
REKINDLING INFLATION FEARS
Higher fuel costs could complicate the inflation outlook after price pressures eased more than expected in June as energy prices retreated.
“While June’s inflation data reflected easing price pressures largely due to lower energy costs, a sustained increase in gasoline prices throughout July could quickly alter that narrative,” said Simon-Peter Massabni, head of business development at XS.com.
“The impact extends beyond fuel itself. Higher gasoline prices feed into transportation costs, freight rates, and broader logistics expenses, which eventually pass through to the prices of goods and services across the economy,” Massabni said.
If the hostilities boil over and the Strait remains more or less closed for a few weeks, already extraordinarily low global oil inventories will be further depleted, Mark Zandi, chief economist at Moody’s Analytics, said in an email.
In that scenario, prices for oil, gasoline and other forms of energy will spike, and physical supply shortages will emerge across the globe.
Reporting by Nicole Jao in New York; Editing by Liz Hampton and David Gregorio
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