Crude oil prices reached their highest level in six weeks on Monday, driven by renewed fighting between the U.S. and Iran and reported attacks on Saudi Aramco facilities, which heightened concerns over Middle East energy supplies. West Texas Intermediate crude rose 1.8% to $93.10 a barrel, and Brent crude gained 1.5% to $97.73 a barrel, levels not seen since late July.
The conflict escalated over the weekend, with the U.S. military striking three Iranian oil tankers after Iran fired ballistic missiles at two Navy warships, according to U.S. Central Command. CENTCOM stated the Iranian vessels were part of a network funding Iran's Revolutionary Guard and regional proxies. Iran's Foreign Ministry condemned the U.S. actions as a "war crime" and "economic warfare." Iranian Parliament Speaker Mohammad Baqer Qalibaf warned of retaliation if U.S. assets were struck, in response to remarks by Defense Secretary Pete Hegseth that the U.S. would "destroy (and sink)" Iranian oil tankers if Tehran fired on American vessels.
Adding to supply uncertainties, a facility in Jizan, Saudi Arabia, home to a 400,000-barrel-per-day refinery, was reportedly hit in fresh attacks on Monday, though responsibility was not immediately clear.
Despite the global market volatility, Andrew Lipow, president of Houston-based Lipow Oil Associates, offered a more optimistic outlook for American motorists. He anticipates that U.S. gasoline prices will likely decline as refineries transition from more expensive summer-grade fuel to cheaper winter blends. "The majority of the country will be transitioning to winter-grade gasoline, and that’s a good 20 cents a gallon cheaper than the prices we see in the wholesale market today," Lipow said, expecting this trend to begin in October, barring significant crude price increases or a wider regional conflict.
However, diesel users may face a more challenging autumn. Demand for diesel is expected to increase with the agricultural harvest season and as the Northeast prepares for the winter heating season. Lipow noted that diesel inventories in New England and the Southeast are at their lowest levels since the Department of Energy began tracking the data in November 1990. This squeeze has been compounded by damage to refineries in the Middle East, which Lipow estimates will take months to repair, and Ukrainian drone strikes that have reportedly crippled 40% to 60% of Russian refining capacity. These combined factors have impacted approximately 8% of global diesel supplies.
Lipow highlighted the significant price disparity between crude oil and refined fuels, noting that while crude oil was trading around $93 a barrel, wholesale gasoline was approximately $135 a barrel and wholesale diesel was around $196 a barrel. He warned consumers could face "sticker shock" with their home heating oil bills, as retail diesel prices in Maine and Massachusetts have already risen more than $2 a gallon compared to the previous year.
The market has previously been cushioned by strategic petroleum reserve releases, commercial inventory drawdowns, and reduced demand in Asia. However, Lipow cautioned, "You can’t rely on inventories forever, and that’s really the concern." He further warned that with East Coast diesel supplies already depleted, another supply shock, such as a hurricane, could significantly worsen the situation.