We saw Brent prices climb above the $90 a barrel overnight, but right now we are looking at flat trading for both WTI and Brent and also American drivers paying an average of $4 a gallon as we continue to monitor the situation in the Middle East and also domestic fuel inventories tumbling 8% below normal levels.
This at a time when world refining is in a deep geopolitical chokehold while joining me to dissect the refinery bottlenecks as well as policy traps.
Patrick Dehaan, who's the head of petroleum analysis at Gas Buddy.
Well, Patrick, good morning.
Thank you so much for joining us.
We're continuing to monitor the situation in the Middle East and also crude oil prices continue to march higher, but we all know we are off those highs earlier this year for 2026, and everyday consumers are still feeling the pain at the pump here.
So what does this mean for Americans moving forward into the rest of the summer driving season?
Well, good morning, good to be with you.
A lot of volatility here as we enter the second half of the summer.
Not only do we really have the geopolitical tensions between the US and Iran that are guiding the price of oil as the Strait of Hormuz is closed, but what has kind of developed into the more significant scenario when looking at gasoline and not so much oil as well as diesel.
Is that disconnect you mentioned refining capacity has been constrained over the last several weeks.
We've seen Ukraine attack Russia's largest oil refineries, and for the world to see such attacks on such a major exporter of energy, especially diesel, 1 in 9 barrels of diesel are produced in Russia, to see that developing is why a lot of Americans are sensing this disconnect between oil prices that though elevated, $80 isn't breaking the bank.
And that is why gasoline and diesel prices have seemingly disconnected.
Diesel back above $5.
Gasoline just about to hit that $4 mark.
It's all in the crack spread and it's become much more profitable for refineries that can export product because of those Ukrainian attacks in Russia.
And as we get into hurricane season now, watching tropical depression too, shouldn't be too much of a.
But rainfall on refineries in the Gulf could be problematic because while oil is getting a lot of attention through what's happened between the US and Iran with the Strait of Hormuz, I don't think there's as much attention looking at what is happening with the refineries, especially those refineries in Russia.
Even here in the United States, our refineries operating at nearly 97% of capacity, so very little margin for error, very little breathing room.
Yes, and as you mentioned, as we all hope for an eventual Middle East resolution that will potentially fix the energy crisis, the Ukrainian drone strikes on Russian refineries have knocked out global capacity, and this also does have an effect on supply chains, especially when it comes Food prices, especially on wheat, but why do you think a potential peace deal won't bring instant relief to American drivers here?
And what can we actually expect in terms of gas prices as we head into the end of summer and into the autumn?
Well, I think a peace deal has been elusive so far.
So to think that there could be a breakthrough, um, you know, it may be challenging to see where that breakthrough might come.
I think the US is thinking it's in a stronger strategic position.
Iran is thinking the exact same, and that's going to lead to a bit of volatility and elevated gas prices likely to finish the summer.
And if we continue to see the street, the strait remain closed until Labor Day, we're going to have continued.
Problems.
Now, a big wild card in why this isn't a more significant challenge than it was back in March and April when WTI was hitting $115 a barrel.
Well, certainly China reducing its imports.
They're also turning back the dial on their refineries, so that's a problem as well.
But plenty of volatility here over the next 6 to 8 weeks.
Until we get through the summer driving season, we may get a little bit of relief this fall, but still, You know, as we run up to the midterms, we still could see gasoline prices stubbornly high so long as the US and Iran have not yet come to a conclusion.
I don't know that a peace deal will happen, right?
This is the one thing that's absolutely uncertain, but motorists will be paying the price if we don't see a peace deal.
The national average already 88 cents a gallon higher than last year.
Americans continue to spend hundreds of millions of dollars more on gasoline every day than last year.
And still the uncertainty over, as I mentioned, hurricane season, which is now getting into its prime, just a lot of uncertainty makes it very cloudy on the horizon for what motors can expect.
There's still the possibility that gasoline prices could set new records later this year as we get into Labor Day, or if there's some improvement between the US and Iran and a quiet hurricane season, it's possible that by Labor Day we could be back below the $4 a gallon mark.
So a wide range of possible trajectories.
Yes, and Patrick, you mentioned hurricane season and it is that time of year, but we're also counting down to back to school season.
And when we take a look at the national average as well as the differences in price across this nation, give us an idea of what we're talking about on a regional basis for gas prices.
As you can see the map behind me, it is certainly not all the same color.
You have extremes on the west coast, areas like California where gas prices are stubbornly flirting closer to the mid-5s and they could get back closer to $6 a gallon as well as the Northeast.
That sees a lack of refining capacity, whereas the nation's interior.
It is a little bit more insulated.
So if your summer road trips, the second half of the summer take you into areas like the Midwest, the Plains, or down to the Gulf Coast, you're going to see much lower prices, and all of it really has to do with state gasoline taxes.
The West Coast generally has more environmental programs like California and Washington have cap and invest programs.
And that certainly couldn't create a wider variety in pricing as you cross the state boundary, you could easily see gasoline prices 2030, or even 60 or 70 cents a gallon higher or lower.
So motorists on those last second road trips, apps like Gas Buddy, Google Maps and Was can point you in the right direction, but otherwise, buckle up, it could be a bumpy end of the summer for gasoline and diesel prices.
Yeah, and finally, before I let you go, we have about 60 seconds here.
So what's going on with diesel?
I mean, as we mentioned, the Ukrainian attacks on diesel have elevated prices.
Diesel is really the fuel that powers much of the US economy.
Diesel standards have improved vastly since 2006.
A lot of Americans believe that diesel is a byproduct of producing for gasoline, where right now it's kind of the inverse.
So you know, diesel could see another stretch here as we get into the winter.
Keep in mind as we get into the fall, uh, harvest season for many farmers, um, you know, so that's a point of contention and heating oil season as well is going to be coming into view in August.
So diesel prices really could see a bit of a rally this fall into early winter as well.
So diesel traditionally is cheaper in the summer and more expensive into the fall, whereas gasoline, it's going to be a bit of the opposite.
Well, Patrick, we will have to leave it there, but thank you so much for weighing in this morning.
I appreciate your time as well as your perspective.
Thanks for having me.
