The US is the world’s biggest oil producer — so why are gas prices rising here?
The oilfields of Texas, Alaska, and other regions throughout the United States have made the country the world’s largest oil producer, pumping more than 13 million barrels per day. That hasn’t stopped gasoline prices at the pump from already rising in the week since the conflict in Iran began. The national average for gasoline now…
The oilfields of Texas, Alaska, and other regions throughout the United States have made the country the world’s largest oil producer, pumping more than 13 million barrels per day.
That hasn’t stopped gasoline prices at the pump from already rising in the week since the conflict in Iran began. The national average for gasoline now sits at $3.32 per gallon, up from $2.98 a week ago, according to AAA — a roughly $0.38 premium.
The apparent contradiction reflects a basic reality of the global energy system: Even though the US has become a crude oil superpower, gasoline prices are tied to a global market where supply disruptions thousands of miles away can quickly ripple back to American consumers.
Oil is traded on a global market, meaning prices respond to changes in worldwide supply and demand rather than the production of any single country. When traders worry that a major supply route like the Strait of Hormuz — which carries roughly a fifth of global oil flows — could be disrupted, crude prices tend to rise everywhere, including in the United States.
Read more: How oil price shocks ripple through your wallet, from gas to groceries
Over the past week, Iran has brought traffic through the strait essentially to a standstill and begun to target key energy infrastructure in the region, including Saudi Aramco’s (2222.SR) Ras Tanura refinery and several oil tankers in the Persian Gulf.
Futures on US benchmark West Texas Intermediate crude (CL=F) gained 38% through the week to briefly cross $92 per barrel before paring gains on Friday, marking the product’s biggest weekly rally since at least 1985. Brent crude (BZ=F), the international pricing benchmark, picked up more than 28% through the week to briefly trade above $94 per barrel before slightly pulling back.
“The effects are already spilling into multiple sectors, from data centers to consumers who will ultimately feel it at the gas pump,” said Aditya Saraswat, head of Middle East and North Africa research for Rystad Energy.
Gasoline is made by blending and refining various kinds of crude oil. As refiners’ costs to purchase crude go up, the prices they charge buyers of their refined products, such as gasoline and diesel, rise in tandem and are then passed on to consumers at the pump.
Futures on wholesale gasoline (RB=F) have soared since the Iran conflict, gaining more than 25%.
The US produces enormous amounts of crude oil, but the country’s refining system was largely built decades ago to process heavier, more sulfur-rich crude oils. Much of the boom in US output over the past decade has come from shale fields that produce lighter, “sweeter” crude.
As a result, US refiners still import millions of barrels of heavier crude each day. The vast majority of those imports, however, come from Canada and Latin America, according to data from the US Energy Information Administration, leaving the US less directly exposed to disruptions in Middle Eastern supply.
“The United States is physically insulated from Middle Eastern instability, protected by oceans and less directly exposed to regional spillovers than Europe or Asia,” Capital analyst Daniela Hathorn wrote in a recent client note.
Even so, the US fuel market remains tightly linked to global trade flows. Crude oil and refined fuels are bought and sold internationally, and prices across regions tend to move together as cargoes are redirected toward whichever markets are paying the most.
That means supply disruptions in one part of the world — even if they do not directly affect US imports — can still push prices higher domestically.
Refined fuels such as gasoline and diesel can react even more sharply than crude during geopolitical shocks. US diesel futures, for instance, surged nearly 12% following the escalation in the Middle East, outpacing gains in both crude and gasoline markets. If shipping disruptions or higher insurance costs tighten supplies of refined products globally, US refiners may export more fuel, which could push domestic gasoline prices higher as well.
A view through the fields at the largest oil refinery on the Arabian Peninsula, located at Ras Tanura, on the east coast of Saudi Arabia, 1992. (Barry Iverson/Getty Images) ·Barry Iverson via Getty Images
The jolt in pump prices of $0.119 from March 1 to March 2 was the largest overnight spike since Hurricane Katrina in 2005, according to Mizuho director of energy futures Robert Yawger. He noted that the geopolitical risks are coinciding with a switch from winter blends to summer blends, which are more expensive.
Analysts generally estimate that for every $10 increase in the underlying price of crude oil, gasoline pump prices in the United States tick up by roughly $0.25. Given Brent is trading at roughly $84 per barrel right now, a jump up to prices above $100 per barrel could mean a per-gallon pump price increase of $0.50 or more.
In the states, Americans are likely already seeing these surging crude prices reflected at their local pumps, Patrick De Haan, head of petroleum analysis at GasBuddy, told Yahoo Finance.
“This isn’t something that’s just going to wait for a month,” De Haan said. “This is something that’s going to start impacting gas prices, probably starting today.”
Jake Conley is a breaking news reporter covering US equities for Yahoo Finance. Follow him on X at @byjakeconley or email him at jake.conley@yahooinc.com.
Click here for in-depth analysis of the latest stock market news and events moving stock prices
Read the latest financial and business news from Yahoo Finance
