Key facts
- Oil prices have risen above $100 per barrel amid escalating Middle East conflict and declining global inventories.
- U.S. average diesel prices reached $6.301 per gallon and gasoline prices averaged $4.355 per gallon on Tuesday evening.
- Diesel prices could reach $6.60 per gallon in the coming days, potentially surpassing the inflation-adjusted peak of 2022.
- Oil industry executives warn of a fuel crunch with no short-term path to significant price declines.
- Global oil inventories plunged by 95 million barrels in August, with cumulative draws since February reaching 507 million barrels.
- Tanker traffic out of the Middle East has seen renewed attacks, reducing oil on water volumes by 65 million barrels.
Oil prices have surged back above $100 per barrel, driven by the re-escalation of the Middle East conflict and declining global inventories, leading to record-high fuel prices in the United States. The average U.S. diesel price reached $6.301 per gallon and gasoline prices averaged $4.355 per gallon on Tuesday evening, according to GasBuddy data.
President Donald Trump suggested that prices would fall significantly once the Iran conflict concludes, but acknowledged that relief might not come before the mid-term elections in early November. Oil industry executives are warning of a looming fuel crunch, with no immediate prospect of substantial price decreases. Chevron CEO Mike Wirth stated that market buffers have been depleted and that oil prices could continue to climb in the coming months, citing difficulty in envisioning a scenario for quick price softening.
The diesel market is being impacted by conflicts in Iran and Ukraine, which are limiting supply from the Middle East and Russia, while Chinese fuel exports have not yet recovered significantly after domestic supply restrictions. The International Energy Agency reported that global oil inventories fell by 95 million barrels in August, contributing to a cumulative draw of 507 million barrels since February. Additionally, tanker traffic out of the Middle East has faced renewed attacks, reducing oil on water volumes by 65 million barrels.
U.S. Interior Secretary Doug Burgum commented that fuel prices were already high during the previous administration. The administration's strategies to lower prices, such as increasing oil production from Venezuela and boosting U.S. refining capacity, are not expected to provide short-term relief ahead of the mid-term elections. Analysts at JPMorgan highlighted that diesel prices represent a significant "behind-the-scenes cost for businesses," impacting the cost of goods and delivery services.