How the Strait of Hormuz Drives Up Gas Prices for American Drivers
Why It Matters
American drivers are paying significantly more at the pump than they were a year ago, and a waterway thousands of miles away is a primary reason why. Understanding how a distant choke point in the Persian Gulf translates into higher costs at your local gas station helps explain a frustrating reality for household budgets across the country.
What Happened
Since fighting began near the Strait of Hormuz on February 28, U.S. gasoline prices have climbed sharply. The strait, a narrow passage between Oman and Iran, serves as the primary export route for oil produced by Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Iraq, Bahrain, and Iran, according to the International Energy Agency.
Despite the fact that most oil flowing through the strait is destined for Asian markets — and that U.S. imports from the Persian Gulf are at their lowest point in roughly four decades — American consumers are feeling the pain. The reason comes down to how global commodity markets function.
“Supply disruptions anywhere in the world can affect prices everywhere in the world because we live in a global market,” said Jeff Lenard, a vice president at the National Association of Convenience Stores. “Oil and refined products like gasoline are traded on the commodities markets. Places with short supply are willing to pay more for product. That drives up the global price.”
Patrick De Haan, head of petroleum analysis at GasBuddy, put it plainly: “The price of oil is based on how much is available in total. Since oil from there is in short supply, the rest of the oil all around the world becomes more expensive.”
By the Numbers
- The national average for a gallon of regular gasoline reached $4.52, up from $4.14 a month ago and $3.14 a year ago, according to AAA.
- Brent crude, the global benchmark, was around $70.50 per barrel before hostilities began and has since climbed to more than $104 per barrel — a roughly $34 increase.
- The National Association of Convenience Stores estimates each one-dollar rise in oil prices translates to approximately 2.4 cents per gallon at the pump — meaning the $34 surge accounts for roughly an 82-cent per gallon increase.
- Prior to the conflict, roughly 20 percent of the world’s oil supply moved through the strait each day.
- Crude oil costs make up about 51 percent of what consumers pay at the pump, with refining at 20%, taxes at 18%, and distribution and marketing at 11%, according to the U.S. Energy Information Administration.
For more on how the conflict has affected domestic supply, see our earlier coverage on U.S. oil reserves and the Iran war’s market impact.
State-by-State Variation
Pump prices vary considerably across states, driven by differences in taxes, refinery access, and environmental regulations. California leads the nation with an average of $6.16 per gallon, followed by Washington at $5.76 and Hawaii at $5.65. The most affordable averages are in Oklahoma at $3.95, Mississippi at $3.98, and Arkansas at $4.00.
Tax policy is a major factor. The federal gasoline tax has held at 18.4 cents per gallon since 1993. President Trump indicated Monday he supports freezing that tax, though no timeline was offered and any suspension would require congressional approval. Republican leadership has historically been cautious about pausing the tax.
State taxes add to the burden. California imposes roughly 70.9 cents per gallon in taxes and fees — the nation’s highest — while Alaska sits at the bottom with just 9 cents per gallon. California’s prices are also elevated by strict environmental standards requiring a specialized fuel blend that costs more to produce and by the state’s heavy reliance on in-state refineries with limited access to interstate pipelines.
Zoom Out
Even if the Strait of Hormuz were to reopen tomorrow, analysts warn that relief at the pump would not come quickly. Supply chain disruptions in complex systems tend to have lasting downstream effects long after the initial cause is resolved, according to a Georgia Tech engineering professor whose analysis was widely circulated. A Goldman Sachs oil trading executive also cautioned that barrels are unlikely to flood back to market rapidly even if conditions improve.
A Congressional Research Service report issued in March warned that a prolonged disruption of Middle East oil trade would create market conditions without any historical parallel. Global oil prices have already shifted significantly as the situation continues to develop.
What’s Next
With the conflict ongoing and the strait still restricted, energy analysts expect continued upward pressure on fuel costs. Any congressional action on the federal gas tax would require legislation, and there is no clear timeline. Consumers should expect price volatility to persist as long as the geopolitical situation in the Persian Gulf remains unresolved.
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