Despite crude oil prices easing significantly after the sharp spikes tied to the 2026 Iran-related conflict and Strait of Hormuz disruptions, retail prices for gasoline, diesel, and jet fuel remain elevated or are rebounding. This is creating pain at the pump and for businesses, even as the broader “crude crisis” appears to be fading.
As of July 10, 2026, the U.S. average for regular unleaded gasoline stood at $3.88 per gallon, according to Bloomberg data. This comes amid record or near-record refining margins (crack spreads) that are keeping product prices high relative to crude.
Crude Prices Are Fading — But Product Prices Aren’t Following
Global oil benchmarks have largely erased the gains from earlier geopolitical spikes linked to Middle East tensions and the temporary effective closure/restrictions on the Strait of Hormuz. Brent crude recently traded in the mid-to-high $70s per barrel (around $76–78/bbl in early July reports), with volatility amid renewed U.S.-Iran tensions but an overall downward trend from crisis peaks.
In contrast, refined product markets are showing a clear disconnect. Refining margins — the difference between the price of crude and the value of products like gasoline, diesel, and jet fuel — have hit record levels in the U.S. and other regions. This “crack spread” phenomenon explains why consumers are still feeling the squeeze.jensendavid.substack.com
High crack spreads mean refiners are earning strong profits on turning crude into fuels, even as crude itself becomes cheaper. This is driven by tight supplies of refined products rather than booming overall demand.
Demand: Softening in Road Fuels, Resilient but Constrained in Jet Fuel
Is demand remaining strong globally? The short answer is no — global oil demand is fading or contracting in 2026, according to major forecasters. This tempers any narrative of insatiable thirst propping up prices.IEA (July 2026 Oil Market Report): Global oil demand is forecast to decline by about 1.1 million barrels per day (mb/d) year-over-year in 2026 — the first annual contraction since the pandemic. The second quarter saw an especially sharp drop of around 5 mb/d y/y due to higher prices, economic weakness, and disruptions to product availability. Demand is expected to improve later in the year but remains below earlier forecasts.
EIA Short-Term Energy Outlook (July 2026): U.S. gasoline consumption in the second half of 2026 is projected to stay below the five-year average and even dip below five-year lows in some months. Higher prices and softer economic conditions are curbing driving demand. This is helping gasoline inventories build despite earlier tightness.
Regional breakdown:
- United States: Gasoline demand is soft and below historical norms. Jet fuel has seen strong production responses, with stocks hitting new year-to-date highs in some recent weeks, though earlier forecasts noted potential tightness. Diesel sits in between but benefits from broader product tightness.
- Europe: Jet fuel demand is strong and surging ahead of the summer travel season (up significantly from earlier in the year in some assessments). However, supply constraints and low inventories (approaching or below critical thresholds like 23 days of supply) raise risks of shortages, flight disruptions, or higher costs. Road fuel (gasoline/diesel) demand is more mixed or softer.
- Asia: Trends are divergent. Gasoline demand is declining in places like China due to efficiency gains and EV adoption. Jet fuel shows more resilience tied to air travel recovery, while diesel faces structural pressures in some forecasts.
Overall, regional product demand has been hit by disruptions and higher prices.
Jet fuel stands out as relatively stronger globally due to the post-pandemic aviation rebound in many markets, but even here, trade volumes dropped sharply earlier in 2026 amid supply shocks.
In short, Global demand is not remaining strong overall — it is fading, particularly for road fuels in OECD countries. Jet fuel demand is more resilient where travel recovers, but product-specific supply issues (not runaway demand) are the bigger driver of high prices.
The Strait of Hormuz and Tanker Dynamics: Potential for Another Dip?
The Strait of Hormuz remains a critical chokepoint (handling a huge share of global seaborne oil trade). Earlier in 2026, conflict-related disruptions caused sharp drops in traffic and major supply shocks, contributing to product price spikes (especially diesel and jet fuel).
Recent developments (early July 2026) show renewed volatility: Tanker crossings have fallen significantly — e.g., from averages around 30+ per day to as low as 13 on some days, with periods of very low or no outbound traffic reported by firms like Kpler and Windward amid fresh tensions and incidents.
Your point about tankers not returning (ballast/empty voyages back into the Gulf to reload) is a key signal to watch. Laden tankers currently on the water will eventually discharge their cargoes. If inbound empty tankers slow meaningfully, it could signal a coming dip in future loadings and exports from the region — potentially tightening supplies again once current cargoes clear.
However, with global demand itself fading (per IEA and EIA), this potential supply-side dip may not translate into the same price pressure as earlier in the crisis. Product markets remain more sensitive due to refining yields, export restrictions (e.g., Russian product embargoes), and lingering logistics effects from prior disruptions.
This morning CENTCOM posts:
And yet the IRGC is claiming that they control the Strait. Buckle up – it is getting wild.
Bottom Line
Gasoline, diesel, and jet fuel prices are staying high primarily because of elevated refining margins and tight product supplies, not because crude is expensive or global demand is surging. Crude prices have faded as some geopolitical risks eased and supply flows partially recovered, but the refining and distribution side of the barrel has not normalized as quickly.
Demand for road fuels is softening or declining in key markets like the U.S. and parts of Asia/Europe, while jet fuel demand is stronger but still facing supply constraints in places like Europe. Global oil demand overall is forecast to contract in 2026.
The tanker situation in the Strait of Hormuz bears watching — recent traffic drops and any slowdown in returning ballast vessels could foreshadow future supply hiccups. However, weaker underlying demand provides a buffer compared to earlier in the year.
For consumers and the broader economy, relief at the pump may come gradually as inventories rebuild (especially U.S. gasoline), seasonal demand eases after summer, and if geopolitical tensions stabilize. In the meantime, the “crack” between crude and products remains wide.
Appendix: Sources and Links
All data current as of mid-July 2026 reporting. Markets remain highly sensitive to geopolitical developments.
Source: Original Article
