Why Fuel Is Getting More Expensive? It Goes Far Beyond The Strait Of Hormuz
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Key Takeaways
- Several disruptions to global fuel supplies are hitting energy markets at once, pushing up prices for gasoline and diesel for U.S. Drivers .
- The resumption of fighting between the U.S. and Iran has constrained oil shipments through the Strait of Hormuz.
- On top of the oil shock, damage to oil refineries in Russia, and the restriction of refined fuels through the strait have pushed up prices directly.
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If you’re wondering why it costs so much to fill up your tank these days, the simple answer is that the war in Iran is causing an energy crisis that is pushing up prices. And while that’s much of the story, the woes of the fuel market actually extend to hotspots all over the world, energy analysts say.
As of Wednesday, a gallon of regular gasoline averaged $3.89 nationwide, up 10 cents over the week and well above the $2.98 prewar price, according to AAA.1 Diesel fuel, crucial to transportation and industry, was $4.94, well above the $3.76 it cost before fighting began in March. Those prices could go much higher if the fighting continues, and supply disruptions from Russia, China, and potential threats elsewhere in the Middle East bite into crude oil and the fuel produced from it.
What This Means For The Economy
High fuel prices hurt household budgets and could damage the economy by pushing up inflation and crowding out consumer spending on other items.
The relief U.S. drivers got from gasoline prices in June is at risk of evaporating. Alongside higher gas prices come renewed risks to the trajectory of inflation and the overall economy.
Gas could average over $4 a gallon over the next week, Patrick DeHaan, head of petroleum analysis at GasBuddy, said in a commentary. Diesel fuel is likely to cross $5 a gallon by Friday, he wrote.
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