Gasoline and diesel prices in the United States have more than doubled since the conflict involving the US, Israel, and Iran began in February. With midterm elections approaching, affordability issues have dominated voter concerns, weighing on Republicans as polls show widespread public disapproval of the administration’s handling of the economy and the war in Iran.
Global oil supplies have faced restrictions since the Middle East conflict effectively halted the flow of oil and refined products through the Strait of Hormuz for months. While crude oil flow is near pre-war levels, prices remain above $100 a barrel. According to David Ruisard, pricing manager at Argus, the ongoing Russia-Ukraine conflict has also impacted supplies, with estimates attributing 60% of the price increase from $3 to $6 a gallon for diesel to the Strait of Hormuz and 40% to the Russia-Ukraine war. Oxford Economics chief US economist Michael Pearce noted that higher energy prices are driving inflation and interest rates, squeezing household budgets and business costs.
Actions taken by the administration
President Donald Trump announced a temporary waiver allowing off-road red dye diesel—which is normally exempt from federal taxes—to be used on US highways without federal levies. However, analysts pointed out potential drawbacks. Ruisard noted that clearing the dye from fuel tanks is difficult, and trucking companies face high fines for keeping dyed diesel in tanks once the relief ends. Additionally, increased consumption could deplete supplies typically reserved by businesses and rail operators.
More successfully, G7 countries announced the release of 100 million barrels of oil and diesel from stockpiles following pressure from Trump. Patrick De Haan of GasBuddy said the announcement helped push prices down, though Pearce warned the release is a temporary fix that will ultimately require stocks to be refilled, keeping energy prices elevated.
Proposed measures and limitations
Trump has also suggested suspending the federal tax on gasoline, which would require congressional approval. Several states, including Ohio and Georgia, have already cut state-level gasoline taxes. De Haan noted that state tax cuts have helped lower prices, but federal suspension could face legislative hurdles and lead to significant lost government revenue. Furthermore, proposals for a ban on US diesel exports carry risks, as Pearce warned it could cause stockpiling, reduce refinery production, and raise prices for other energy products.
Analysts suggest that the administration has largely exhausted its available policy options. De Haan stated that meaningful price reductions depend on resolving the underlying geopolitical tensions involving Iran, Russia, and Ukraine. Even if those conflicts were resolved, Ruisard cautioned that damaged Middle Eastern facilities mean production would still take four to six months to normalize, indicating that elevated fuel prices are likely to persist.
