The average US gasoline price recorded its highest level in nearly four years following the escalation between the US, Israel, and Iran in late February, Reuters reported, citing data from the American Automobile Association (AAA). Average pump prices yielded a 7-cent increase to reach $4.18 a gallon on April 28, marking the most significant single-day jump in over a month. Since late February, retail fuel costs have increased by $1.19 per gallon, representing a surge of more than 40%.
The price hike reflects soaring energy costs as regional conflict continues to choke shipping traffic through the Strait of Hormuz, a critical maritime chokepoint for approximately 20% of global oil and natural gas supplies.
The upward trajectory in crude costs has significantly compressed retail margins. Tom Kloza, Chief Energy Advisor to Gulf Oil, noted that while gross margins for domestic retailers have historically averaged 40 cents per gallon over the previous five years, those margins were squeezed by approximately 30 cents as of last week. Kloza explained that many recent wholesale increases in April had not yet been passed to consumers, suggesting that retail prices must move higher to prevent individual dealers from incurring losses.
Market volatility was further exacerbated last week as Brent crude futures gained 16% and US West Texas Intermediate (WTI) rose nearly 13%. This increase reflects growing supply anxieties as diplomatic efforts to resolve the Iran conflict stalled, ending a brief price correction that had been predicated on hopes for the reopening of the Strait of Hormuz.
In addition to geopolitical tensions, domestic supply remains tight due to a combination of planned and unplanned refinery outages. According to Rystad Energy (an energy research and business intelligence company), April has seen approximately 670,000 barrels per day (bbl/d) of planned maintenance and 150,000 bbl/d of unplanned shutdowns.
Specifically, the US Midwest has been impacted by the 45-day maintenance period at Phillips 66’s 356,000-bbl/d Wood River refinery and ongoing work at Marathon Petroleum’s 253,000-bbl/d Robinson facility. Furthermore, a brief power outage at British Petroleum (bP)’s 440,000-bbl/d Whiting refinery in Indiana forced a processing unit shutdown over the weekend, further rationalizing the price spikes in the Great Lakes region.
Historically, US retail energy prices have remained sensitive to disruptions in the Middle East, a region that remains a cornerstone of global energy security. The current volatility underscores the fragility of the global supply chain when critical transit corridors like the Strait of Hormuz are compromised by kinetic conflict.
