London, May 7, 2026 – U.S. fuel markets are flashing warning signs. President Donald Trump has repeatedly argued that gasoline prices will “drop like a rock” once the Iran conflict ends.
Yet the sharp and persistent drawdowns in U.S. stocks of crude, gasoline and diesel in recent months suggest otherwise.
And the risk extends far beyond sticker shock at the pump.
More than 13 million barrels per day (bpd) of crude oil and refined fuels were knocked out of the market after the Strait of Hormuz was almost entirely closed when war broke out on February 28 – roughly 13% of world supplies.
The oil shock has rattled the global economy, prompting energy-saving measures in several countries, forcing refiners to cut output and leading airlines to scrap thousands of flights.
Global benchmark Brent crude futures, which are today more than 40% higher than at the start of the war at over $100 a barrel, have garnered most of the headlines. But prices elsewhere in the physical market paint an even grimmer picture.
European diesel prices hit a record $205 a barrel on April 7 and still hover around $160, 60% above their pre-war level, underscoring the acute scarcity of refined fuels.
The flip side of this squeeze is the powerful tailwind for refineries worldwide, none more so than the U.S. Gulf Coast export hub.
Responding to extraordinary price signals, U.S. refiners have boost jet fuel output by 18% since the war began, while gasoline and diesel output have each risen by over 2%, according to the Energy Information Administration.
Crude and fuel exports have soared since the start of the war to a record of over 14 million bpd in the week ended April 24, EIA data showed. Those flows have provided badly needed relief to fuel-starved economies – but at a steep cost.
TIME OF RECKONING
That export frenzy has triggered a rapid, highly counter-cyclical drawdown in domestic inventories that is increasingly threatening the U.S. economy.
In a normal year, refiners build gasoline stocks ahead of the peak summer driving season, while distillate inventories are replenished through the warmer months ahead of the harvest season and the winter heating demand.
But nothing is normal this year.
U.S. distillate stocks – mainly diesel and heating oil – are at their lowest level since 2005 and about 20% below their 10-year average for this time of year, EIA data showed. At the current pace of drawdowns, the U.S. – and the global economy – risks entering this winter with exceptionally thin supply cushions.
Jet fuel tells a similar story. Output of the aviation fuel is running about 30% above its 10-year average at roughly 2 million bpd, yet exports surged in March and April to a record of around 320,000 bpd, according to Kpler data, leaving little room for further disruption.
Gasoline is where the stakes are arguably highest. The U.S. is the world’s largest consumer of the motor fuel, accounting for about 8% of global demand.
The pivot toward producing jet fuel and diesel – the products most urgently needed in Europe and Asia right now – has come at the expense of gasoline. Compounding the problem, gasoline imports into the U.S. East Coast nearly halved in April from a year earlier as global supply tightened.
As a result, U.S. gasoline inventories have fallen over the past 11 weeks far faster than in recent years. Morgan Stanley analysts expect stocks to sink below 200 million barrels by the end of August – a level never seen in that month during the modern era.
A POLITICAL CONUNDRUM
Soaring global prices and booming exports have already pushed up U.S. pump prices to $4.30 a gallon, according to EIA data. That’s more than 40% higher than a year ago – a reality that is apt to be a major political headache for Trump ahead of November’s midterm elections.
Unfortunately for the president, with domestic gasoline consumption running slightly above year-ago levels, prices are likely to keep rising as peak summer demand collides with record-low inventories. They may remain above historical norms well beyond September as refiners are forced to rebuild severely depleted stocks.
To try to cap fuel prices ahead of the vote, the Trump administration could consider restricting some fuel exports. But that would almost certainly send global prices soaring and undermine the U.S. reputation as a reliable supplier at a moment of extreme stress.
Such a move would also squeeze refiners’ margins and could ultimately force them to cut operating rates, worsening shortages at home and abroad.
The Iran war has turned America’s energy dominance into a double-edged sword. By ramping up exports in the face of a global supply crisis, the U.S. has helped stabilize allies and markets.
The cost, however, has been to expose its own consumers and economy to sharply higher prices. That may ultimately prove to be a very high price to pay in November.
(The opinions expressed here are those of Ron Bousso, a columnist for Reuters.)
