American motorists are paying more for fuel than ever before at this point in the calendar, with the national average price of regular gasoline climbing to $4.22 a gallon after a 7-cent overnight jump. The increase follows oil prices surging back above $100 a barrel for the first time since July, as attacks on oil facilities and shipping in the Middle East threaten to further weaken an already strained supply chain.
Brent crude, the international benchmark, rose nearly 3% to $100.72 a barrel, while US benchmark crude gained 2.4% to $95.25. The price at the pump is now more than a dollar higher than at the same point last year, according to AAA data. Diesel prices, which carry particular weight in the economy because the fuel moves trucks, ships and agricultural equipment, have hit an all-time high of $5.94 a gallon and continue to climb, now 9 cents above Friday's level.
The latest surge follows US military strikes on five Iranian tankers in response to attempted missile attacks on a Navy warship, alongside attacks by Iranian-backed Houthi rebels that ignited fires at Saudi oil facilities. Crude prices have fluctuated considerably over more than six months of conflict between Israel, the United States and Iran, with the fighting halting most shipping through the Strait of Hormuz, a narrow waterway that carried a fifth of the world's oil supply before the war began.
Prices swung between roughly $72 and $102 a barrel in July, reflecting shifting hopes that Washington and Tehran would agree on a plan allowing stranded tankers to move oil safely out of the Persian Gulf. Bank of America analysts said in a research note that a durable deal before the US midterm elections is increasingly unlikely, and could remain elusive beyond that. The bank raised its oil price forecast for the second half of the year to $83 a barrel in light of persistent disruptions to Hormuz, but cautioned that if attacks keep a chokehold on traffic, prices could reach $95 to $120 a barrel, with damage to major energy infrastructure potentially producing spikes of up to $150.
Negotiations over a preliminary deal to end the conflict broke down over control of the Strait of Hormuz. Iran insists it has the right to set terms and charge fees for ships travelling through the waterway off its coast, while the US wants passage to remain free and has used a naval blockade to restrict Iranian ports and oil tankers. Recent stepped-up attacks by Yemen's Houthis could constrain global supplies further because they have targeted an alternative shipping route Saudi Arabia has relied on to transport oil during the war.
The impact of higher energy costs is being felt well beyond the pump. Jet fuel has become so expensive that US and international carriers have cut flights while raising fares and fees. Refinery outages in Russia, reduced refining activity elsewhere and sharply declining inventories have pushed diesel and gasoline prices sharply higher globally, according to Bank of America. With the US midterm elections now roughly eight weeks away, rising prices at the pump are set to weigh on voters and could have an outsized impact on the political landscape, as households and businesses across the country contend with the highest seasonal fuel costs on record.