Fuel prices are headed back up amid renewed military clashes between the U.S. and Iran.
The national price of gasoline rose on Friday to $3.88 a gallon, up from $3.84 a week ago, according to AAA. In recent weeks, prices at the pump fell to as low as $3.80 on July 5, down from more than $4.50 in May, after Washington, D.C., and Tehran signed a temporary ceasefire last month.
Regular gas averaged $2.98 a gallon just before the Iran war started in late February. “Gas prices are going up again, as the future of the ceasefire between the U.S. and Iran remains uncertain,” the auto group said in a report.
The latest spasm of violence in the Middle East is reviving concerns that a prolonged conflict could disrupt trade through the Strait of Hormuz, the Persian Gulf waterway that handles roughly 20% of global energy flows. President Trump reiterated his stance on Friday that the ceasefire with Iran was “over” after less than three weeks, while noting that the U.S. would continue negotiating.
The number of ships traversing the strait on Thursday fell to 34, the lowest daily level since June 28, when Iran launched drone attacks in the region following U.S. airstrikes on the Islamic Republic, according to S&P Global MINT and S&P Global Commodities at Sea.
“Iran-linked and sanctioned traffic remained elevated, accounting for roughly one-third of total crossings,” the financial research firm said of the ships navigating the strait on July 9.
The price of oil accounts for 51% of the cost of a gallon of gas, making it the biggest factor affecting fuel prices, according to the Energy Information Administration. The cost of refining crude into gas, jet fuel, heating oil and other energy products accounts for roughly 20% of gas prices; other factors include marketing and distribution expenses, as well as local and federal taxes.
Other geopolitical events are also constraining the world’s crude and gas supplies. Attacks by Ukraine on Russian oil refineries and other facilities are taking a toll, according to Patrick De Haan, a petroleum expert at GasBuddy, which tracks U.S. gas prices.
“Every refinery knocked offline in Russia removes refined products like gasoline and diesel from the global market, even if crude oil itself keeps flowing,” he said in a report.
“Moscow’s response made a tight global market even tighter,” De Haan added. “Russia has now banned diesel exports outright, layered on top of existing restrictions on gasoline and jet fuel exports, in an attempt to keep fuel inside the country.”
De Haan also noted that the seasonal pickup in driving, when fuel demand typically jumps during the summer, pushes up gas prices. Meanwhile, environmental rules require refineries to produce summer-blend gas to reduce heat-related evaporation — a shift that can cost between 10 and 25 cents per gallon, he said.
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