Gasoline now averages $4.44 a gallon across the United States, according to AAA, up 38.7% from the same point last year. Diesel is worse: a record $6.40 a gallon, against $3.70 a year earlier. Both figures are as of Sept. 17.
The cause is back above $100 a barrel. On Sept. 9, Iran’s Islamic Revolutionary Guard Corps said it attacked two US vessels and eight tankers in the Strait of Hormuz, after the US targeted five Iranian oil tankers. Strikes on energy facilities in Saudi Arabia came the same day. Brent crude rose more than 3% and passed $100 per barrel for the first time since May 22.
A second supply blow
Saudi Arabia’s East-West Pipeline, the alternative route to the Strait of Hormuz, was then taken offline following the attacks. Reports that the shutdown would delay deliveries to some refineries sent Brent up more than 6% to $107.63 per barrel. According to market sources, some oil shipments due in Europe in September were canceled on Sept. 15. Up to 4% of global oil supply could be at risk if the outage drags on.
Prices and the Fed
The US Consumer Price Index rose 0.4% in August from July and 3.4% from a year earlier. A 3.9% increase in gasoline prices accounted for more than one-third of the monthly rise.
On Wednesday the Federal Reserve raised its policy rate by 25 basis points to a range of 3.75%-4%, its first hike since 2023. The move does nothing for the oil shortage itself. Higher borrowing costs do slow economic activity, however, and a stronger dollar makes oil dearer for buyers paying in other currencies, which weighs on demand and can limit further price rises.
Politics before the midterms
The pump prices land weeks before the Nov. 3 congressional midterm elections. The White House is considering the Defense Production Act to expand US refining capacity and ease the cost for consumers and businesses.
When oil climbed past $100 on Sept. 9, President Donald Trump argued that the war with Iran would end immediately after the midterms. He claimed Iran was trying to influence the elections, that the US Navy had “full control” of the Strait of Hormuz, and that numerous tankers were passing through every day. Gasoline prices would fall once the war ended, he said.
On Sept. 14, Trump said Iran wanted a deal with Washington “quickly and very eagerly.” Brent jumped about 5% that day to $109.80, gave back most of the gain after his remarks, and settled 1% higher at $105.68. Iran said there would be no talks with the US until its conditions were met.
Efforts in the House of Representatives to withdraw American forces from the conflict remain on the agenda.
