In the past few weeks, you, as well as most of the U.S., may have noticed your car’s tank taking a fair bit more money to fill back up. In most places throughout the country, gas prices have risen 40 or 50 cents a gallon, with a few hotspots like California seeing increases approaching a dollar per gallon. You may have also, like many other Americans, noticed that the forces behind this increase are a lot more nebulous than in the case of previous increases. We have heard little in the way of major news from the Iran war, which continues to drag into its eighth month, and the Strait of Hormuz, the closure of which resulted in the year’s first substantial jump in prices, has been blockaded for almost as long. Just over a week ago from today, the national average for gas and diesel prices broke a new record high for September. The monthly average price for gas of $4.33 per gallon blew out the previous record for September, set in 2023 at $3.83 per gallon. The current market for diesel is even more bleak, with the national average hitting a new all-time high of $6.52 per gallon in late August of this year — which it remained relatively close to throughout September — before creeping down to an average of $6.38 per gallon in the past few days, per the American Automobile Association.
This begs the question, with geopolitical conditions remaining mostly static, what is responsible for all the pain at the pump? The answer comes down to several factors: a changing battlefield in Yemen, drone strikes in Saudi Arabia, salt caverns under the US, a new offensive from Ukraine, and a pivot in China’s energy strategy.
Yemen, a Middle Eastern nation located on the southern Arabian peninsula, has been embroiled in a civil war for over 12 years. It has recently found itself in a deadlock between the Yemeni government and a paramilitary Islamist organization known as the Houthis. The Yemeni government, backed by Saudi Arabia, held a firm grip on the nation’s southern coast, and allowed Saudi oil tankers to move freely through the Bab-el-Mandab strait. This was especially critical to enabling Saudi Arabia’s oil exports in the months following the closure of the Strait of Hormuz, where the Bab-el-Mandab strait saw a significant increase in tanker traffic. That was, however, until mid-September, when the Houthis took vast swaths of coastline in a number of decisive victories against Yemeni and Saudi forces, including strategic islands in the middle of the strait itself.
The Houthis, backed by Iran, closed this strait to Saudi Arabia as well, forcing all Saudi oil tankers through the only remaining route out of the Red Sea: the Suez Canal. Although it is safe, exiting out of the Suez Canal requires the ships to traverse the Mediterranean Sea and go around almost all of Africa, refueling multiple times, before finally ending up near the original exit of the Bab-el-Mandab Strait. A Saudi ship’s journey to east Asia, which once took 10-12 days, has now stretched to over 29, according to Al Jazeera. During all of that time, the ships burn fuel, pay workers, and need to sell their oil at a far higher price to profit. That cost, which has gone up massively, is passed on to the consumer through gas and diesel prices.
But Saudi Arabia’s woes don’t end there. The East-West pipeline, which allowed seven million barrels of oil a day to move across the nation, bypassing the Strait of Hormuz, was damaged by a drone strike and forced to dramatically cut capacity on Sept. 10. While it was able to be brought back online within two weeks, the pipeline now appears very vulnerable, and considering the dramatic success of the first attack, future efforts to damage or disrupt it are almost certain to succeed. Both this initial shutdown period and uncertainty around this critical pipeline’s future have led to higher costs as oil supply decreases and other countries demand more oil to replenish their reserves in case of future shutdowns.
Few countries have relied on these strategic reserves more than the U.S. Donald Trump, who during his inaugural address pledged to fill the nation’s strategic petroleum reserves “right to the top,” has since released over 110 million barrels of oil from those reserves since the war in Iran began in an effort to keep fuel prices down. As these reserves continue to drain, they close in on a legal minimum level of 252.54 million barrels, after which the president must formally declare a kind of “energy emergency” in order to enable further withdrawals. Some experts have warned that the system of salt caverns where the nation’s oil reserves are stored is already under threat of partial collapse, and that consistently operating below this level could place the reserve’s functionality and cavern’s integrity at substantial risk.
The chances of the U.S.’s strategic reserve, and many other strategic reserves around the world, to be replenished to safer levels remains low. This is because warfare hasn’t just impacted production in the Middle East, but also in Russia. While Russian oil continues to be sanctioned heavily by the U.S. and most of Europe due to Russia’s war in Ukraine, many nations — including Turkey, China, and India — import large amounts of Russian oil. This flow has also recently come under attack, with Ukrainian drones striking a number of targets deep into Russian territory — notably, a number of oil refineries, as part of a push to apply stress on the Russian military’s infrastructure. On Sept. 30, the Russian government issued a ban on diesel and gas exports lasting at least until the end of October, citing pressure from sanctions, and likely motivated in part by new threats to domestic production. These attacks incentivise Russia, which is dependent on diesel for the operation of its military, to sell less of it to other nations. Nations like China, which previously relied on exported Russian oil for some of their needs, are now in the process of shifting that demand to the same supply which was already suffering under the burden of war in the Middle East.
These factors, along with smaller elements like the recent Federal Reserve rate hike and restrictions on Chinese energy exports, have all compounded to create the highest diesel and some of the highest gas prices on record in the U.S. However, it isn’t just the U.S. People all over the world are filling up to find that their prices have also spiked, but until these pressures dissipate, gas and diesel prices returning to pre-Iran war levels appears unlikely to happen anytime soon.
Featured image: Betty Cavicchia’27
Additional image: Al Jazeera
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