Why Your Gas Prices Are Going Up (Even When the War Pauses)

What’s Happening at the Pump?

Imagine you have a piggy bank, and every time there’s trouble far away, you have to put more money in just to fill your car. That’s kind of what’s happening with gas prices in the US.

• US gas prices have shot up during the start-stop war with Iran.
• After a short break where prices fell a little, the average gas price jumped 15 cents in one week to $3.94 per gallon and looks like it will go over $4 again.
• Diesel (the fuel trucks use to deliver your stuff) went back above $5 per gallon on Thursday for the first time in 3 weeks, says AAA.
• This is a painful reminder that a military fight in the Persian Gulf (a area near Iran) can hit your wallet directly.

Important: Gas and diesel prices are not just following oil prices anymore. They have “taken on a life of their own,” separate from what happens in the Strait of Hormuz (a narrow water path for oil ships) or US-Iran negotiations.

It’s Not Just About Oil

You might think: “If oil gets cheaper, gas gets cheaper.” But it’s not that simple.

Here’s what happened:

• For three weeks, the Strait of Hormuz was partly open. Oil companies moved 200 million barrels of crude oil (raw oily liquid) out of the Persian Gulf. This briefly pushed oil prices below pre-war levels.
• Gas and diesel prices did fall — but not anywhere near as low as before the war.

Then:

• A deal between Iran and the US (called a Memorandum of Understanding) fell apart last week.
• Oil prices jumped above $85 a barrel (up from low $70s).
• Crude oil is the main ingredient in gas, so this matters a lot.

But check this out:

• Since the war started, oil is up 16%.
• Gas and diesel are both up more than 32% — double the oil gain!

Important: The big gap between oil price rises and fuel price rises is mostly about how oil is turned into fuel, not just the oil itself.

Why Fuel Prices Rose More Than Oil

Refineries Can’t Flip a Switch

Crude oil is useless for your car until it goes to a refinery (a factory that turns oil into gas, diesel, etc.).

• Even when the strait was open, refineries had already made their July plans and can’t quickly make more or less fuel.
• The war damaged 30 Middle Eastern refineries (broken or destroyed by Iran).
• Global refinery output dropped by 3 million barrels at the worst point.
• Today, 2.1 million barrels of refining capacity is still offline (says JPMorgan’s chief commodities economist).

Trouble in Other Places Too

• Ukraine used drone attacks to damage many Russian refineries.
• Russia used to export lots of diesel (world’s #2 exporter) but now buys it from others.
• This caused a global diesel shortage.

The US Is Busy Helping the World

The US has the opposite issue: its refineries ran at 96% capacity last month — the most crude processed since 2019.

• But a record amount of US fuel is sent abroad: jet fuel to Europe, diesel to Asia and Australia.
• This leaves less fuel at home.

Results:

• US gasoline stockpiles (saved-up fuel) are the lowest since 2012: 210 million barrels.
• That’s only 20 million barrels above “critical” and 30 million above Hurricane Katrina lows (when stations ran out).
• Summer driving is up, and diesel demand will peak for the fall harvest. Low supply + high demand = high prices.

Important: US refineries are making record profits (called “crack spreads”). Gasoline crack spreads are up 60% from last year; diesel and jet fuel are more than double 2025 levels (per US Energy Information Administration).

One More Worry: The Heat

Summer heat can make things worse:

• Refineries need cool temps to work well.
• They boil oil to split it into gas, diesel, etc., then cool it.
• If it’s too hot, they can’t make as much fuel.

Summary

• Gas hit $3.94/gal (up 15¢ in a week); diesel back over $5.
• War with Iran and a failed US-Iran deal pushed oil up 16%, but gas/diesel up 32%.
• Refinery damage in Middle East and Russia cut fuel-making ability.
• US refineries are full but export fuel, dropping home supplies to 2012 lows.
• High demand + low supply = price rises; extreme heat may limit production more.

FAQ

1. What is the Strait of Hormuz?
It’s a narrow waterway where a lot of the world’s oil ships pass. If it’s blocked or risky, oil movement slows.

2. Why don’t gas prices fall when oil gets cheaper?
Because refineries (that turn oil into gas) were damaged or full, and the US sends much fuel overseas. Less fuel at home keeps prices high.

3. What is a refinery?
A place that takes raw oil and cooks/cools it into usable things like gasoline, diesel, and jet fuel.

4. What does “crack spread” mean?
It’s the profit a refinery makes by turning oil into fuel. Higher spread often means higher prices for you.

5. How does summer heat affect my gas?
Refineries need cool air to make fuel efficiently. Extreme heat can slow them down, making less gas and pushing prices up.