The price of a gallon of regular gasoline in the U.S. climbed 31 cents in the past week, spiking to an average of $4.54 per gallon Wednesday, a price 52% higher than before the war with Iran began, according to AAA data.
The main reason drivers are paying more at the pump is because the war has stranded oil tankers near the Strait of Hormuz, a narrow passage through which a fifth of the world’s crude oil normally passes. The price of crude oil, which is the main ingredient in gasoline, climbed for most of the past two months because Iran has effectively shut the waterway located off its coast.
In mid-April, U.S. gasoline prices fell daily for almost two weeks amid signs the conflict could be winding down.
“After the announcement of the initial ceasefire, there was kind of optimism that this really could be the beginning of the end of the conflict,” said Rob Smith, director of global fuel retail at S&P Global Energy. “And so crude prices came down correspondingly, gasoline spot prices followed, and so on and … the retailers lowered prices as well.”
But gasoline prices reversed course and began increasing again as deepening hostilities over the strait between the U.S. and Iran kept oil supplies constrained.
“There’s a fundamental shortfall that will exist globally or fundamental struggle to meet that demand that will drive up price,” Smith said. “No matter what a government says or what any market person thinks, there is a true kind of upward pressure that’s being exerted on prices every day the Strait of Hormuz is constrained. And it is still severely constrained.”
The Associated Press has the full story.
