Unpacking Global Fuel Costs
The forces behind today’s prices go far beyond any single policy or politician. Here’s the full picture, from a 21-mile strait in the Middle East to the refinery down the road.
Key Takeaways
- The Strait of Hormuz, carrying roughly 20–27% of the world’s maritime oil trade, has been severely disrupted since late February 2026, triggering the largest oil supply shock in modern history and driving crude prices well above $100 per barrel.
- Gas prices reflect a layered stack of costs, crude oil, refining, transportation, taxes, and market speculation and in 2026, nearly every one of those layers is pushing upward simultaneously.
- OPEC+ production decisions, refinery capacity losses, post-pandemic demand patterns, and the seasonal switch to summer blend fuel have all compounded the pressure from geopolitical conflict.
- Analysts project some relief by late 2026 if Middle East tensions ease, but a return to pre-conflict price levels is not expected in the near term.
$138
Brent crude peak on April 7, 2026 — highest in years
20%
of global oil supply cut off by Strait of Hormuz closure
$4.80
Projeceted avg. national gas prices, Memorial Day – Labor Day
The answer to why gas is so expensive right now is not a single event or policy decision. It is the result of multiple forces geopolitical, structural, seasonal, and economic, arriving at the same moment and compounding one another.
Geopolitical Chokepoints and Global Crude Oil Supply
The price of gasoline begins long before a tanker reaches a refinery. It begins at the point where crude oil moves — or stops moving — across the world’s most critical maritime corridors. When those corridors are disrupted, the effects ripple through every layer of the energy supply chain and show up on the sign outside your local gas station.
The Critical Importance of the Strait of Hormuz in Oil Transit
The Strait of Hormuz — a 21-mile-wide waterway bordering Iran and Oman — is the world’s single most critical energy chokepoint. Roughly 27% of the world’s maritime crude oil trade moves through it daily, approximately 20 million barrels. What makes it uniquely vulnerable is the near-total absence of alternatives. Most oil production from Saudi Arabia, Iraq, Kuwait, and the UAE has no viable alternative export path at equivalent scale. No pipeline network or combination of existing infrastructure can replace what the strait moves on a normal day.
How Conflict in Core Shipping Lanes Instantly Spikes Risk Premiums
Energy markets do not wait for physical supply to be interrupted before reacting — they price in risk immediately. By the end of March 2026, Brent crude had risen by about 65% and recorded its highest monthly increase ever. When disruption becomes real, insurance companies raise war-risk rates, shipping companies reroute to longer and costlier paths, and buyers compete aggressively for whatever oil remains available. Each response adds cost that moves downstream directly into what consumers pay per gallo
Military strikes against Iran trigger strait closure sequence
Tanker traffic collapses to below 10% of normal capacity
Brent crude peaks at $138/barrel; monthly avg hits $117
Longest sustained Hormuz closure in modern history — 2+ months
Regional Instability and International Supply Disruptions
The current disruption traces to military strikes against Iran beginning on February 28, 2026. Iranian retaliatory actions struck Qatar’s Ras Laffan LNG terminal, Saudi Arabia’s Yanbu refining complex, and the UAE’s Fujairah export hub. Tanker traffic through the strait collapsed to below 10% of normal capacity within weeks. As of early May 2026, the closure had been in effect for approximately two months — the longest sustained closure in the strait’s modern history — with Brent trading around $105 per barrel and global oil output expected to fall by 6.9 million barrels per day year-on-year in Q2 2026, the largest quarterly decline since the COVID-19 pandemic.
Structural Drivers Behind Why Gas Is So Expensive
Even before 2026, gasoline prices were under structural pressure from several directions. Geopolitical conflict accelerated an existing problem — it did not create it from scratch.
Crude Oil Pricing and Its Dominant Impact on Gallon Costs
Of all the factors that determine pump prices, crude oil is the single most influential — typically accounting for more than half of what you pay per gallon. When crude moves, retail prices follow quickly on the way up and more slowly on the way down, a pattern analysts call the “rockets and feathers” effect. Brent crude rose from $73 per barrel in late February to $138 per barrel on April 7 — its highest level in years — then averaged $117 per barrel for the month. Those movements translated directly into gas station signs within days.
Global Refinery Capacity Shortages and Processing Bottlenecks
Crude oil doesn’t become gasoline on its own — it has to be refined, and the U.S. has been quietly losing that capacity for years. Following permanent closures including the LyondellBasell Houston facility and the Phillips 66 West Coast refinery, the U.S. will have 620,000 barrels per day less refinery capacity than its 2019 peak. That capacity is not coming back. The result is elevated crack spreads — the margin between crude input and refined output — that consumers absorb directly at the pump.
OPEC+ Production Quotas and Market Manipulation
OPEC+ controls a substantial share of global crude output, and their decisions directly shape prices. In May 2026, the UAE’s departure from OPEC reduced the group’s spare production buffer from a forecast of 3.8 million barrels per day in 2027 down to just 2.5 million. Less spare capacity means less ability to cushion the market when unexpected supply disruptions occur.
Post-Pandemic Demand Surges vs. Lagging Supply Infrastructure
The pandemic compressed global fuel demand dramatically in 2020. When economies reopened, demand recovered faster than supply infrastructure could follow. Producers reported difficulty getting workers back to oil fields, with supply chain problems extending to parts and equipment. That structural lag — demand recovering faster than the industry’s physical capacity to meet it — left the market with limited cushion heading into 2026, precisely when a major supply shock struck.
Analyzing Present Trends — Are Gas Prices Going Up?
As of summer 2026, prices are going up. GasBuddy forecasts the national average will reach $4.48 per gallon on Memorial Day — up from $3.14 a year ago — and could average $4.80 per gallon through Labor Day. If the Strait remains closed through much of the summer, prices could exceed $5 per gallon and potentially set all-time records.
The Switch to Summer Blend Fuel and Rising Production Costs
Each spring, U.S. refineries switch from winter-grade to summer-blend gasoline — a more expensive formulation required by the EPA to reduce evaporation. The transition temporarily reduces finished gasoline volume while adding cents per gallon before any geopolitical factor enters the equation. In 2026, that predictable seasonal pressure is arriving on top of an already severely elevated baseline.
Peak Travel Seasons and Consumer Demand Spikes
Memorial Day through Labor Day drives more vehicle miles traveled than any other stretch of the year. The American fleet remains heavily weighted toward trucks and SUVs, meaning demand spikes are not yet meaningfully moderated by the slow shift toward EVs. Despite record prices, 56% of Americans still plan to drive more than two hours this summer — down from 69% last year, a meaningful reflection of financial strain.
Domestic Energy Policies and Strategic Petroleum Reserve Levels
The federal government’s primary short-term tool for moderating fuel price spikes is the Strategic Petroleum Reserve. The U.S. announced a release of 172 million barrels over two months to help offset the current price surge, with allies including Japan releasing their own reserves. Reserve releases can take pressure off prices in the short term, but they cannot fully offset a disruption as severe as the current Hormuz closure — and whatever is released today is unavailable for the next emergency.
Extreme Weather Events and Gulf Coast Refinery Shutdowns
The Gulf Coast houses a significant concentration of America’s remaining refinery capacity, which creates a specific geographic vulnerability. When hurricanes or extreme heat events strike the region, that processing capacity can be shut down entirely — removing supply from the national chain precisely when summer demand is at its peak. That vulnerability becomes more consequential as overall refinery capacity declines and the system has less redundancy to absorb individual disruptions.
Economic Pressures Injected Into the Pump
Geopolitics and structural supply issues explain much of 2026’s price environment — but several economic forces add cost between the wellhead and your gas tank that rarely make headlines.
Inflation & Distribution Costs
Running pipelines, terminals, and delivery trucks all cost more when general prices are elevated. A 3.8% year-over-year jump in energy-related prices feeds through the entire distribution system — not just the commodity itself.
Trucking Labor Shortages
Gasoline moves from refineries to stations by truck — and the trucking industry has faced persistent driver shortages since the pandemic. Fewer drivers mean higher per-load costs and added friction across the last mile of the supply chain.
State Taxes & Regulations
California averages $5.88/gallon. New Hampshire averages $3.80. The gap reflects cap-and-trade programs, low-carbon fuel standards, and state excise taxes — not just crude oil and refining margins.
Market Speculation
During acute uncertainty, speculative long positions in oil futures amplify price swings and make the path downward slower and less linear than the path upward — even when physical supply is stabilizing.
Future Forecasts — Will Gas Prices Go Down?
The trajectory depends on how several overlapping conditions resolve — or don’t — over the coming months. Clearer signals are beginning to emerge, but the picture remains uncertain.
Wall Street Speculation and Energy Market Futures Trading
During periods of acute uncertainty like the current Hormuz disruption, speculative long positions add buying pressure to futures markets and can push prices higher even when the physical supply situation is stabilizing. This layer doesn’t create the underlying problem — but it amplifies short-term price swings and makes the path downward slower and less linear than the path upward.
Conditions Required for Significant Long-Term Relief at the Pump
The EIA projects Brent crude will fall to an average of $89 per barrel in Q4 2026 and $79 per barrel in 2027 — but that assumes the Strait begins to reopen in late May and early June. For meaningful relief to materialize, the strait must reopen, shut-in Gulf production must resume, and depleted global inventories need time to rebuild. A ceasefire announcement is not the same as normalized supply — the mechanics of market recovery operate on a fundamentally different timeline than the mechanics of conflict resolution.
"If the conflict last months, the you're no longer talking about the price spike. You're talking about inflation, slower growth and real pressure on family budgets. (..) These kind of energy shocks, if they last, don't stay at the pump. They really ripple through everything."
Production Projections for Domestic and International Oil Fields
U.S. domestic output is projected to increase by approximately 0.5 million barrels per day — meaningful, but insufficient for a disruption of this scale. Oil shipments through the Strait are not expected to return to pre-conflict levels until later in 2026. Gas prices are likely to stay elevated through at least mid-2026, with gradual improvement possible in the second half of the year if geopolitical conditions stabilize.
$106
Projected Brent avg. May–June 2026 (EIA)
$89
Projected Brent avg. Q4 2026 if Strait reopens (EIA)
$79
Projected Brent avg. for full year 2027 (EIA)
What the current moment makes undeniably clear is that the global energy system is deeply interconnected and that a single chokepoint on the other side of the world translates directly into what Houstonians pay every time they fill up their tank.
The Strait of Hormuz is 7,500 miles from Houston. You felt it at the pump this week.
That’s the world the World Affairs Council of Greater Houston was built to help you understand. Since 1969, we’ve brought Houstonians together with the diplomats, economists, and global thinkers who can explain what’s happening and what it means for this city.
Sources
• Short-Term Energy Outlook — May 2026 eia.gov/outlooks/steo/
• Global Oil Markets — STEO Report, May 2026 eia.gov/outlooks/steo/report/global_oil.php
• Strait of Hormuz Oil Chokepoint Analysis eia.gov/todayinenergy/detail.php?id=65504
• National Gas Price Averages — April & May 2026 gasprices.aaa.com/2026/04/
• National Average Exceeds $4/Gallon — Newsroom, April 2, 2026 newsroom.aaa.com — April 2, 2026
• 2026 Summer Travel Survey & Gas Price Forecast gasbuddy.com/newsroom — May 20, 2026
• Commodity Markets Outlook — 2026 worldbank.org/en/research/commodity-markets
• 2026 Iran War Fuel Crisis en.wikipedia.org/wiki/2026_Iran_war_fuel_crisis
