Washington Eases Gasoline Rules as Iran Pressure Campaign Jolts Fuel Costs

The Environmental Protection Agency has granted permission to begin selling gasoline blended with 10% ethanol as early as September 1, rather than the typical mid-September transition. This early switch allows for an extra supply of domestic gasoline, potentially alleviating some strain on fuel prices. Since mid-July, the average U.S. gasoline price has stayed above $4 per gallon, a $1 increase from when the Iran conflict began, and the highest this late in the year.

The move to allow early ethanol-blended gasoline comes on the same day Treasury Secretary Scott Bessent announced "the toughest sanctions in history" against Iran. These sanctions are set to complement the existing U.S. blockade and have been urged upon by other countries like China. Bessent also questioned why oil prices jumped following the announcement, suggesting oil markets might be misinterpreting the pressure campaign.

The Energy Department expects fuel prices to remain high through the end of the year after revising its outlook upwards due to the ongoing conflict with Iran. The waiver relaxes summertime low-volatility gasoline requirements aimed at reducing smog, though state-level fuel rules might still limit how rapidly additional supply reaches certain markets.

This development is part of a broader effort to boost supply wherever possible. The administration has also temporarily relaxed Jones Act shipping restrictions and allowed broader sales of higher-ethanol E15 gasoline this summer. While these measures do not reopen the Strait of Hormuz, they attempt to address the issue one gasoline rule at a time.