US gasoline prices surge 16% in just one week! Middle East conflicts disrupt global supply, even the largest oil-producing country struggles to stand alone.

Texas, Alaska, and other oil fields in the United States have made the country the world's largest oil producer, with a current daily production exceeding 13 million barrels. However, this has not stopped the increase in gasoline prices at US gas stations within a week since the outbreak of the conflict in Iran. According to data from the American Automobile Association (AAA), gasoline prices in the US reached $3.45 per gallon last Sunday, an increase of 16% from the previous week. Analysts point out that with the increase in WTI crude oil prices, US retail gasoline prices may rise to $4 per gallon. This seemingly contradictory phenomenon reflects a basic reality of the global energy system - although the US has become a major oil-producing country, gasoline prices are still linked to the global market. In this market, supply interruptions thousands of miles away can quickly pass on to US consumers. Oil is traded on the global market, which means that prices depend more on global supply and demand changes rather than the production of a single country. When traders are concerned about important supply channels like the Strait of Hormuz - which carries about one-fifth of the global oil transportation volume - being disrupted, oil prices tend to rise globally, including in the US. In the past week, Iran has essentially brought shipping through the Strait of Hormuz to a standstill and has begun to attack key energy infrastructure in the region, including the Saudi Aramco's Ras Tanura refinery and multiple oil tankers in the Persian Gulf. The US benchmark WTI crude oil futures rose 38% last week - the largest single-week increase since at least 1985, surged again by more than 25% on Monday, currently priced at $114.24 per barrel. Brent crude oil futures rose more than 28% last week, surged more than 23% on Monday, currently priced at $114.18 per barrel. Aditya Saraswat, director of Middle East and North Africa research at energy research firm Rystad Energy, said: "This impact has already started spreading to multiple sectors, from data centers to consumers who will feel the impact at gas stations." Gasoline is produced by blending and refining different types of crude oil. As refining companies face higher costs of purchasing crude oil, they pass on the increased prices to customers who purchase refined products (such as gasoline and diesel), and then pass them on to consumers at gas stations. Data shows that wholesale gasoline futures have soared by over 25% since the outbreak of the conflict in Iran. The US produces a large amount of crude oil, but its refining system is mostly built decades ago, mainly for processing heavier and higher sulfur content crude oil. The substantial increase in US crude oil production over the past decade has mainly come from shale oil fields, which produce lighter and sweeter crude oil. Therefore, US refineries still need to import millions of barrels of heavier crude oil every day. However, according to data from the US Energy Information Administration, the vast majority of these imports come from Canada and Latin America, which to some extent reduces the direct exposure of the US to supply disruptions in the Middle East. Analyst Daniela Hathorn wrote in a recent client report: "The US is relatively isolated geographically from the unstable situation in the Middle East, protected by oceans, and its direct impact from regional shocks is smaller compared to Europe or Asia." However, the US fuel market is still closely linked to global trade flows. Crude oil and refined products are bought and sold on the international market, and prices in different regions often change with the flow of goods towards the market that pays the highest price. This means that a supply interruption in one region of the world - even if it does not directly affect US imports - can still push up domestic prices in the US. During geopolitical crises, the reaction of refined products such as gasoline and diesel may be even more intense than that of crude oil. For example, US diesel futures rose nearly 12% after the escalation of tensions in the Middle East, exceeding the increase in crude oil and gasoline markets. If shipping interruptions or higher insurance costs lead to a tight global supply of refined products, US refiners may increase fuel exports, further driving up domestic gasoline prices. According to Robert Yawger, head of energy futures at Mizuho Securities, the overnight rise in oil prices of $0.119 per gallon between March 1 and March 2 is the largest since Hurricane Katrina in 2005. He pointed out that this geopolitical risk coincides with the transition from winter to more expensive summer gasoline blends. Analysts typically estimate that for every $10 increase in crude oil prices, gasoline prices at US gas stations will increase by about $0.25. Patrick De Haan, head of petroleum analysis at GasBuddy, said in an interview that US consumers are likely already seeing these soaring oil prices reflected at their local gas stations. He said, "This isn't something that's going to happen a month from now. This impact is likely to be felt in gasoline prices from now." Inflation Could Become a "Stumbling Block" for Trump's Midterm Elections It is worth mentioning that gasoline prices are one of the most direct indicators of inflation perceived by the American people. Although overall prices are still lower than the historical peak of over $5 per gallon after the outbreak of the Russia-Ukraine conflict in 2022, the rapid increase in US gasoline prices is enough to raise market concerns. The rapid rise in gasoline prices not only undermines Trump's core political promise to suppress inflation but also casts a shadow over his economic agenda as the midterm elections approach. Analysts say that the continued rise in oil prices may have a negative impact on the Republican Party in the November midterm elections when both parties will vie for control of Congress. Voters are already dissatisfied with high living costs and Trump's governance of the economy. In his State of the Union address last month, Trump boasted about falling gasoline prices and claimed that inflation was "plummeting." Now, the reversal of oil prices directly challenges this narrative logic. In this situation, the Trump administration is urgently evaluating various intervention tools to contain the rise in oil prices while seeking to fulfill the promise of lowering living costs under the pressure of the midterm elections. Trump hinted at taking "upcoming action" to stabilize oil prices, while the US Treasury Department announced temporary exemptions for Indian refiners importing crude oil from Russia. It is reported that the White House is still weighing multiple options, including providing insurance guarantees for oil tankers passing through the Strait of Hormuz, organizing naval escorts, and temporary exemptions from fuel blending requirements. Additionally, there were reports that Trump administration officials had discussed involving the Treasury Department in buying and selling oil futures, but this highly controversial approach has been ruled out for now. The Trump administration is also reluctant to immediately use the Strategic Petroleum Reserve (SPR) because it was heavily used during the tenure of former President Joe Biden, and the current inventory level of the Strategic Petroleum Reserve is only about 60%. The frequent release of petroleum reserves causes losses and the need for delayed maintenance, leading to more complicated situations. More importantly, the soaring oil prices are in direct contradiction to Trump's core goal of reducing government borrowing costs. Trump has been tirelessly urging the Federal Reserve to cut interest rates, with one of the deep motives being to alleviate the burden of around $1 trillion in federal debt annually. However, the rising oil prices are exacerbating concerns about inflation rebound, suppressing market expectations for a Fed rate cut, and raising US bond yields.