Pockets of fuel shortages worldwide, continuing price spikes, and rising inflationary pressure are now more imminent amid the ongoing Iran war escalation and the continuing decline of global energy supplies, analysts said.
On Wednesday, the global benchmark for crude oil topped $101 per barrel for the first time since July and the U.S. standard for diesel rose above $200 per barrel—just the second time ever after a brief blip in 2022 following Russia’s invasion of Ukraine. With oil flows again slowing to a crawl in the Strait of Hormuz bottleneck, central banks worldwide will again look at rate hikes to stem rising inflationary pressures, they said.
“The conflict has entered a new stage,” said Susan Bell, senior vice president for the Rystad Energy research firm. “Global stocks of diesel, gasoline, and jet fuel have drawn down an awful lot; they are now at critical low levels. They’ve breached levels we last saw after Russia first invaded Ukraine.”
The only solution is that prices rise more to force further “demand destruction” of oil and fuels, she said. “I hate to say it, but we need prices at the pump to go up higher to encourage consumers to make choices on their energy consumption. We need more (global) austerity measures,” Bell told Fortune.
Heading into the fall and winter, fuel shortages—especially diesel—will become more prevalent, especially in the U.K. and other parts of Europe, as well as much of South Asia, she said.
This week has already seen the U.S. more aggressively attack Iranian oil tankers with Iran targeting vessels as well, and the Yemeni Houthis escalating attacks on Saudi Arabian energy facilities and vessels in the Red Sea—tankers that already were taking alternative paths to avoid Hormuz. As such, moderate tanker traffic through Hormuz in recent weeks—sometimes above 50% of pre-war volumes—has again slowed to very little movement.
While countries continue to deplete their oil reserves—the U.S. Strategic Petroleum Reserve is down to a 44-year low—there are no comparable reserves for fuel, and many refineries are offline from the Middle East to Russia. Supplies are becoming especially dire for diesel, which fuels the global economy for trucking fleets and more, said oil forecaster Dan Pickering, founder of Pickering Energy Partners consulting and research firm.
“The [global] market is competing for a limited supply of diesel. So, at what point do we worry? We worry now,” Pickering told Fortune. “Prices are quite high and there’s no easy relief valve. Nobody is building new oil refineries.
“There’s a growing awareness that diesel is the bigger canary in the coal mine right now. Folks are paying attention to $100 [oil], but they really ought to be paying attention to $200 diesel,” he added.
And inflationary pressures are rising.
“The risk that this shows up in inflation is growing—not just U.S. inflation, but global inflation,” Pickering said. “You’re starting to see more folks talking about how this might impact interest rate decisions at central banks.”
Looking forward
The average price for a gallon of regular unleaded gasoline in the U.S. rose to $4.22 on Wednesday—an all-time September high. And the price at the pump for diesel in the U.S. already is at its highest ever.
Casey’s General Stores—the third-largest convenience store chain in the U.S. after 7-Eleven and Circle K—is seeing impacts at the pump and in snack sales, said Casey’s CEO Darren Rebelezon during an earnings call Wednesday.
“With the higher fuel prices, we’re seeing exactly the type of behavior that we would expect to see—fewer gallons per trip, but more trips made,” Rebelez said. “People are trading out of premium and mid-grade and opting for regular.”
And customers are buying fewer in-store brand-name snacks because of inflationary price increases, he said, adding that the behavioral buying differences are starker amongst lower-income customers.
While some countries and companies can work on pumping out marginally more oil—and further deplete oil reserves—similar solutions don’t exist for fuel.
“You can’t spend money and fix the problem,” Pickering said. “You either need to resolve the Middle East situation and get that capacity back on or resolve Russia-Ukraine and get that capacity back on. If you can’t do that, then price and demand must solve the imbalance, which is painful to consumers.”
Speaking to reporters Wednesday, President Donald Trump said he expected Iran to continue the war through the November midterm elections in order to damage him politically—a sentiment shared by energy analysts.
“They’re desperate to try and affect the election so that we can get a nice weak group of people in there and leave them alone and let them have their nuclear weapon,” Trump said, arguing that Iran is losing and he will aim to end the war “immediately after the election.”
Rystad Energy chief economist Claudio Galimberti said the combination of further depleting inventories and demand destruction from rising prices will keep the global economy afloat into November and early December if necessary.
But, by the end of the year, a U.S.-Iran truce may become necessary to avoid major economic damage into 2027, he said. “The [Trump] administration will want to show inflation is under control.”
