The United States Energy Department’s statistical body has in its recent short-term energy outlook report said that fuel prices could keep rising for months even after the Strait of Hormuz reopens, Reuters reported.
Notably, this comes after US President Donald Trump repeatedly assured American consumers that shocks are temporary and there will be immediate relief when the war with Iran ends, it added. Trump has seen his approval ratings in the US dip amid the war, months ahead of the November mid-term elections.
Full impact yet to be seen
The US-Israel war with Iran has pushed oil and fuel prices near recent highs as Tehran has been blocking the crucial waterway.
The Energy Information Administration (EIA) on Tuesday said fuel price trajectory depends on multiple variables, including how long the strategic Strait of Hormuz remains closed, and how much oil production in the Middle East has been impacted by the conflict. At present, these are only estimates and the real impact would be known once the dust settles, it noted.
“Just as we had never before seen the strait close, we’ve never seen it reopen. What exactly that looks like remains to be seen,” the EIA said.
The EIA said it expects full restoration of flows through the Strait of Hormuz will take months even after the conflict ends, and it expects uncertainty around future supply disruptions to keep oil prices above pre-conflict levels through the rest of this year.
US petrol prices to touch $4.30 a gallon in April
- US retail gasoline prices are likely to peak at a monthly average of $4.30 a gallon in April, and average more than $3.70 a gallon for the year, the EIA said in its short-term energy outlook series.
- The US national average price of gasoline stood at $4.14 a gallon as of Tuesday, the highest since August 2022, GasBuddy data showed.
- Motor fuel prices could surge past $5 a gallon and hit a new record within weeks if there is no clear plan to reopen the Strait of Hormuz, GasBuddy analyst Patrick De Haan told Reuters last week.
- Diesel prices, meanwhile, have been surging even more than gasoline as the Middle East is a key supplier of both the fuel and the crude oil grades that have the highest yield of it upon refining.
- The EIA said it expects diesel prices to peak at a monthly average of $5.80 a gallon in April, and average $4.80 a gallon for the year. The record U.S. retail diesel average was $5.83 in June 2022, according to GasBuddy data.
Trump’s ultimatum looms
Trump has given Iran an ultimatum to open the Strait of Hormuz by the end of Tuesday and threatened that if an agreement is not reached today, “a whole civilization will die tonight”.
“A whole civilization will die tonight, never to be brought back again,” Trump wrote, adding that he doesn’t want that to happen, “but it probably will”.
“However, now that we have Complete and Total Regime Change, where different, smarter, and less radicalized minds prevail, maybe something revolutionarily wonderful can happen, WHO KNOWS? We will find out tonight, one of the most important moments in the long and complex history of the World,” he said, adding that “47 years of extortion, corruption, and death, will finally end. God Bless the Great People of Iran!”
This comes after he gave Iran a 48-hour ultimatum last week to open the Strait of Hormuz. “Tuesday will be Power Plant Day, and Bridge Day, all wrapped up in one, in Iran. There will be nothing like it!!! Open the F***** Strait, you crazy b******s, or you’ll be living in Hell – JUST WATCH! Praise be to Allah. Tuesday, 8:00 P.M. Eastern Time!” was Trump’s ominous weekend warning.
(With inputs from Reuters)