Is America’s Gas Pump Pain Just Getting Started?

By
Kiran Asim
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Drivers across the United States are confronting another jump in gasoline and diesel prices, and the latest squeeze may not be over. The immediate problem is no longer just the price of crude oil. A prolonged disruption to Middle Eastern supplies has depleted global inventories, squeezed refined-product markets and left U.S. motorists increasingly exposed to further shocks.

The national average price of regular gasoline reached about $4.44 a gallon on September 17, according to AAA, up 16 cents in a week. Diesel reached a record national average of roughly $6.39 a gallon. In parts of the Midwest, gasoline prices rose by more than 20 cents in a single day.

The International Energy Agency says global oil inventories have fallen by 507 million barrels since the conflict began in February, while more than 10 million barrels a day of Gulf production remained shut in during August. The agency now expects global oil supply to decline by 5.7 million barrels a day in 2026, with a full recovery in Middle Eastern production deferred until 2027.

There are signs of limited relief. Saudi Arabia is working to restore part of an alternative export pipeline after it was damaged, and oil prices eased as traders assessed the prospect of recovering flows. But traffic through the Strait of Hormuz remains severely constrained, leaving the market vulnerable to another disruption.

The question for American drivers is therefore no longer whether the energy shock has reached the pump. It has. The question is how much further the pressure can travel through gasoline, diesel and the wider economy if the disruption persists.

How We Got Here

The crisis began in late February 2026, when U.S. and Israeli airstrikes targeted Iran, triggering a wider conflict that severely disrupted oil production and shipping across the Middle East.

The Strait of Hormuz, through which roughly one-fifth of the world’s seaborne oil and gas normally passes, became a major bottleneck. Attacks on tankers and energy infrastructure, together with the broader conflict, sharply reduced the flow of crude and refined products through the region.

The disruption was initially cushioned by emergency measures and by the oil industry’s existing inventories. The United States made large volumes available from its Strategic Petroleum Reserve as part of an International Energy Agency-coordinated release, while other countries also drew on stocks. Chinese refiners reduced crude purchases and increasingly drew on domestic inventories as high prices weakened demand.

Those measures helped prevent an even sharper initial price shock. But they could not replace lost production indefinitely.

The IEA estimates that global observed oil inventories fell by another 95 million barrels in August alone, bringing the cumulative draw since February to 507 million barrels, or an average of 2.8 million barrels a day.

The significance of that drawdown is becoming clearer now. Inventories are the market’s first line of defence when physical supplies are disrupted. The less oil available in storage, the less room there is to absorb another shock.

 

Prices at the Pump Right Now

The latest pressure is particularly severe in refined products.

The IEA says U.S. diesel prices surpassed $200 a barrel in early September, about 94% above pre-war levels. Gasoline and diesel prices have risen faster than crude in part because refineries are struggling to replace lost supplies of Middle Eastern products.

Tom Kloza, chief energy adviser at Gulf Oil, warned that motorists would see “staggering increases” at the pump as retail prices caught up with earlier increases in wholesale fuel costs.

Patrick De Haan of GasBuddy similarly warned motorists to “buckle up” as the increases worked through the retail market.

Liz Thomas of SoFi has also pointed to the worsening diesel market, where prices have moved beyond levels that earlier forecasts had anticipated for later in the year.

The national averages conceal substantial regional differences. Some Midwestern states have experienced daily increases of more than 20 cents a gallon as refiners and distributors respond to tighter supplies.

Diesel is particularly important because it is the fuel of freight. A sustained increase in diesel prices therefore has effects far beyond the service station.

 

The Middle East Bottleneck Remains

The core supply problem has not been solved.

Diplomatic efforts between the United States and Iran have made limited progress, while attacks in the Gulf and around the Red Sea continue to complicate efforts to restore normal shipping.

The IEA estimates that Gulf oil exports in August were roughly half their pre-war level. Crude losses have narrowed somewhat as alternative routes and escorted shipping have allowed some oil to move around the Strait, but refined-product and liquefied petroleum gas exports remain nearly 60%, or 3.7 million barrels a day, below February levels.

Diesel has been especially affected. Gulf diesel and gasoil exports averaged only about 390,000 barrels a day in August, just over one-quarter of their pre-war level. The disruption has been compounded by problems in Russia’s refining system and reduced Russian product exports.

There are, however, signs that some alternative routes may provide temporary relief.

Saudi Arabia is working to restore part of its East-West pipeline, which carries crude to the Red Sea and allows the kingdom to bypass the Strait of Hormuz. The pipeline was damaged in an attack last week, temporarily disrupting exports from the Red Sea port of Yanbu.

Saudi Arabia is also seeking to increase the use of ship-to-ship transfers off Oman to move crude to Asian customers. Oil prices fell for a third consecutive session on September 18 as traders assessed the possibility that these alternative routes could limit the immediate loss of supply.

But the relief remains uncertain. The pipeline damage has affected several pumping stations, and estimates of the time needed for full repairs vary. Meanwhile, tanker traffic through the Strait remains severely constrained.

 

Why Refined Products Matter More Now

The most important change in the market may be the widening gap between crude prices and refined-fuel prices.

The IEA says the tightness is now most acute in refined products, particularly diesel. Global refinery throughput is forecast to fall by 2.6 million barrels a day in 2026, while refinery margins have reached exceptionally high levels in the Atlantic Basin.

That matters because refiners cannot simply replace every lost barrel immediately.

Different crude grades produce different quantities of gasoline, diesel and other products. The loss of Middle Eastern crude has therefore affected the composition of available feedstocks as well as the total volume of oil reaching world markets.

Refineries outside the conflict zone are responding by increasing production where possible. But the IEA says the global refining system is already being pushed toward its limits.

This helps explain why diesel prices have been rising so sharply even as global oil demand is falling.

The demand decline is itself part of the adjustment. High fuel prices and limited availability are forcing consumers and industries to reduce oil use. The IEA expects global oil demand to fall by 2.5 million barrels a day in 2026, with losses concentrated in middle distillates and petrochemical feedstocks, particularly in Asia.

In other words, the market is balancing itself partly through destruction of demand rather than through a rapid restoration of supply.

 

What This Means for American Drivers and Businesses

Higher gasoline prices directly reduce disposable income for households.

Diesel is an even broader problem for businesses. Trucks, agricultural machinery, construction equipment and other heavy vehicles depend heavily on diesel. Higher fuel costs eventually feed into transportation rates and the price of goods.

The pressure is particularly significant because the United States is already running its refineries at high rates.

U.S. refiners have increased output where possible, but they cannot fully compensate for the disruption in global refined-product markets. The longer the crisis lasts, the more important domestic inventories become.

That does not mean the United States is simply running out of crude.

The more immediate concern is the availability of refined products, especially diesel, and the shrinking global cushion that has traditionally helped absorb disruptions.

Some analysts had warned earlier this year that a prolonged disruption could eventually push U.S. gasoline above $5 a gallon as inventories fell and refining flexibility diminished.

Jeff Currie, the veteran commodities strategist, recently described the possibility of average U.S. gasoline reaching $5 a gallon before the November midterm elections as “extremely high.”

That is a forecast, not a consensus. But it illustrates how dramatically expectations have changed since the beginning of the conflict.

 

The Interest-Rate Effect

The oil shock is also complicating the Federal Reserve’s fight against inflation. On September 16, the Fed raised its benchmark interest-rate target by a quarter percentage point to 3.75%-4%, its first increase in more than three years, as inflation remained above the central bank’s 2% target.

The decision came as surging energy prices threatened to push inflation higher and make it harder for the Fed to ease monetary policy. Higher interest rates will not directly lower the price of gasoline or crude oil, but they can weaken demand across the economy by making borrowing more expensive.

If energy prices remain elevated, the United States could therefore face the uncomfortable combination of higher inflation and slower economic growth. The Fed’s latest projections show policymakers continue to see inflation risks tilted to the upside.

 

An Election-Year Problem

The timing also gives the energy shock an added political dimension. The United States is heading toward the November midterm elections, and gasoline prices are among the most visible indicators of household economic pressure.

Higher prices at the pump can feed into broader concerns about the cost of living, while diesel increases can raise transportation and business costs throughout the economy. The issue is particularly sensitive in an election year because voters encounter fuel prices directly and frequently.

That does not mean fuel prices alone will determine the elections. But if gasoline and diesel remain substantially above their pre-conflict levels in the weeks ahead, energy costs are likely to remain part of the economic debate surrounding the midterms.

The political significance will depend not only on the national average but also on how long elevated prices persist and how voters assess their causes and the government’s response.

 

Looking Ahead

The International Energy Agency now expects the recovery of Middle Eastern oil supplies to be deferred until 2027. That does not mean gasoline prices must remain at current levels until then. Prices could fall sharply if shipping normalizes or diplomatic progress reduces the security risk.

The latest decline in crude prices demonstrates how quickly markets can respond to even the prospect of additional supply routes.

But rebuilding inventories is a different matter.

Even if oil begins moving normally through the Strait of Hormuz, the barrels lost during months of disruption will not immediately be replaced. Global inventories have already fallen by more than 500 million barrels, while the refining system is operating under considerable strain.

The opposite scenario is more straightforward. Further attacks on shipping, infrastructure or alternative export routes could tighten supplies again and send crude and refined-product prices higher.

Some earlier bank analyses have modeled crude prices reaching $150 a barrel under severe and sustained disruption. Such scenarios remain contingent on the duration and geographical spread of the conflict rather than being established forecasts.

For now, U.S. refiners are running hard, domestic production is providing an important partial offset, and alternative Middle Eastern export routes are offering some relief.

But those buffers have limits.

The energy shock has already moved from the oil fields and shipping lanes to American service stations. The next phase will depend on whether the physical flow of oil and refined products can recover faster than inventories are being depleted.

That means the recent jump in prices may not be a one-week event for motorists.

The market has some routes to relief. But until the flow of Middle Eastern oil and refined products improves on a sustained basis, the pressure on gasoline, diesel and the wider U.S. economy is likely to remain.

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Kiran Asim is a writer who covers the U.S., Europe, South Asia, and the Middle East. Her reports and analyses look at the geostrategic issues and contemporary developments and their economic and political implications. She also writes about society and education.

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