President Trump has succeeded at times in calming crude-oil markets even as the Iran war rages on. But he doesn’t have the same sway over gasoline prices, which ultimately matter more to consumers.
Despite the resumption of U.S.-Iran hostilities, U.S. benchmark crude prices are hovering around $80 a barrel. That is about 18% above where they were before the Iran war began. By contrast, gasoline prices remain 32% higher at $3.94 a gallon, according to energy data firm OPIS.
So-called gasoline crack spreads, which measure the difference between gasoline and crude-oil prices, are averaging 90 cents a gallon so far this month. That is the highest level in four years, according to data from Novi Labs.
Why are fuel prices so much higher? One reason: fuel markets didn’t have the buffers that crude oil had. This means that even if there’s another ceasefire that allows oil to again flow, gasoline and diesel prices are likely to stay higher for longer.
The crude-oil market’s surprise shock absorber was China, which dramatically cut its imports. It imported just 5.7 million barrels a day in June, according to the International Energy Agency’s July oil market report, down from around 11 million barrels a day before the Iran war.
China hasn’t provided the same slack in the refined-products market. It is typically a net exporter of gasoline and diesel, but has reduced exports significantly since the war started, according to Rob Smith, global head of fuel retail at S&P Global Energy. Chinese refiners’ throughputs dropped to a six-year low in May, consistent with its decline in crude imports, according to the IEA.
Crude-oil supply was also boosted by hefty releases from strategic petroleum reserves around the world. Members of the International Energy Agency, a coalition of oil-consuming countries, released 2.4 million barrels a day in May and 1.5 million barrels a day in June. The vast majority of these releases were of crude oil rather than refined fuel, according to data from the IEA.
All of this crude oil needs to be processed to become gasoline and diesel. But refining capacity in two major fuel-export regions—the Middle East and Russia—has been severely curtailed by conflict. Global refineries processed 5.1 million fewer barrels a day in the second quarter compared with the same period in 2025, according to the IEA.
Middle Eastern refiners’ major export path is bottlenecked by Strait of Hormuz disruptions, and some facilities have been damaged by Iranian strikes. They processed just 7.6 million barrels a day in the second quarter, a fifth fewer than they did in 2025, according to the IEA.
In Russia, the world’s second largest fuel exporter, more than a quarter of refining capacity has been knocked offline by Ukrainian drones. The country, which typically supplies about 11% of global seaborne diesel, imposed a short-term export ban on the fuel last week. It has also started buying gasoline, a fuel it typically doesn’t import, from India and Belarus.
Russia’s diesel export ban could have knock-on effects. If diesel prices keep rising globally, U.S. refiners may be motivated to boost diesel production and cut gasoline production unless the price of the latter rises, according to energy economist Philip Verleger.
Global gasoline inventories were 3% below the trailing-five-year average as of June and the gap is expected to widen to 4% this month, according to S&P Global. In the U.S., gasoline inventory is about 8% lower than the five-year average for this time of year.
Despite tight fuel inventories, global gasoline demand has remained resilient because of government policies to protect consumers from high prices, according to the IEA. In total, 92 countries have introduced some kind of consumer support in the form of fuel-tax cuts, subsidies, price caps or other support systems, according to Pew Research Center, which analyzed IEA’s data.
In the U.S., part of the rise in gasoline prices can be traced back to the government. In March, the Trump administration raised to record levels the quota of biofuels that U.S. refiners must blend into their fuels for 2026 and 2027.
Since most U.S. gasoline already contains the maximum standard amount of ethanol of 10%, refiners cannot simply blend more biofuel to meet these targets, according to Robert Auers, refined-fuels analyst at Novi Labs. Instead, they must buy compliance credits, which became more expensive as blending requirements increased. Novi Labs estimates that these compliance credit costs embedded in gasoline prices rose to 14 cents a gallon in July, up from 5 cents the previous year.
Relief won’t be on the way for motorists for some time, even if the Strait of Hormuz opens up. One reason: Shut-in crude oil production can be resumed quickly, but turning refining capacity back on takes longer, according to S&P Global’s Smith.
There is also a logistical bottleneck. Crude oil tends to travel in large vessels that can carry up to 2 million barrels. Ships that transport fuels typically carry tens of thousands of barrels. “It takes longer for that [fuel] supply to get out of the Middle East because it travels via smaller vessels,” Smith said.
Trump could take some of the pressure off pump prices by suspending the ethanol- and biodiesel-blending mandates or suspending the gas tax. But the bigger determinant of fuel prices is the global market.
The problem there is that the U.S. doesn’t have a big strategic stockpile of gasoline or diesel. Unfortunately for drivers—and the U.S. economy—there is no easy way out of high gas prices.
Write to Jinjoo Lee at jinjoo.lee@wsj.com
