Fuel prices could keep rising for months even after the Strait of Hormuz reopens, the U.S. Energy Information Administration said on Tuesday, deviating from President Donald Trump’s assurances that consumers will see immediate relief when he ends the war with Iran. The U.S.-Israeli war with Iran, now in its second month, has sent oil and fuel prices skyrocketing around the world as Iran has been blocking vessels from crossing the Strait of Hormuz, a key trade chokepoint. Trump, whose approval rating dipped to new lows as pump prices surged to multi-month highs, has repeatedly told Americans that the sticker shocks are temporary.
However, the EIA, the U.S. Department of Energy’s statistical arm, was less certain in its short-term energy outlook report. The trajectory of fuel prices depends on a number of variables, including the duration of the Strait of Hormuz’s closure and the amount of oil production that has been shut in the Middle East due to it, both of which the agency can only estimate, it said.
“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. Trump has given Iran an ultimatum to open the Strait of Hormuz by the end of Tuesday. If an agreement is not reached on Tuesday, “a whole civilization will die tonight,” Trump threatened.
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.
U.S. 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 U.S. 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.
(Reporting by Shariq Khan in New York; Editing by Chizu Nomiyama)