Why fuel prices may go higher still
Seven months into the US conflict with Iran, with no clear end in sight, the global oil market has now largely exhausted the safety measures that exist to keep a lid on petroleum prices.
Oil prices have been rising rapidly since the conflict in Iran began in February 2026. The Strait of Hormuz, a crucial route for Middle Eastern oil, is operating at only 15% of its prewar capacity. Oil prices have climbed from $65 per barrel to over $100 per barrel in mid-September. Analysts feared prices could reach $150 or even $200 per barrel, but this has not yet materialized.
The pipeline from Saudi Arabia to Yanbu on the Red Sea, which can carry up to 7 million barrels per day, has been intermittently attacked by Iran-backed militias, causing temporary disruptions. Russia's drone strikes on refineries have reduced diesel production and prompted a ban on exports, removing 3% of the global daily supply of diesel fuel.
Americans are spending $117 billion more on fuel since March 1 compared to the same period last year, with diesel prices reaching an average of $6.52 per gallon. The international community has already used most of its tools to curb demand and increase supply, leaving limited options and the risk of further price hikes.
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