The national average price of gasoline in the US rose by 13 cents in a week, reaching a three-month high. The American Automobile Association (AAA) attributed the increase to volatility in the Strait of Hormuz, which pushed crude oil back into the $100 per barrel range for the first time since July.

Supply and Demand Dynamics

Data from the Energy Information Administration (EIA) showed a contraction in both demand and production last week. Gasoline demand decreased from 8.92 million barrels per day to 8.55 million barrels per day. Simultaneously, gas production fell from 9.8 million barrels per day to 9.3 million barrels per day.

Geopolitical Escalation

Tensions between Washington and Tehran have intensified. Senior Iranian officials reportedly view escalation as key leverage against the US. The Islamic Revolutionary Guard Corps (IRGC) claimed it struck two US vessels and eight oil tankers in the Strait of Hormuz, a claim denied by US Central Command.

Additionally, Iran-backed Houthis have taken control of the port city of Mocha and may have struck Saudi Arabia’s East-West pipeline, which has a capacity of 7 million barrels per day.

Political Reactions

President Donald Trump criticized Democrats at the Midterm Convention in Dallas, stating that a Democratic victory would "destroy Texas oil and gas" and increase taxes. Texas accounts for over 42% of total domestic crude oil production, according to the EIA. Energy Secretary Chris Wright previously noted that oil production in the Permian Basin had quadrupled.

Senator Elizabeth Warren criticized Trump over rising energy costs. Meanwhile, diesel prices in parts of California reached $9.999 per gallon, with the diesel crack spread hitting an all-time high of $102/bbl in August.

The International Energy Agency (IEA) has revised its 2026 world oil demand forecast, projecting a drop of 2.5M BPD, steeper than its earlier forecast of a 1.6M BPD decline, citing an impasse in US-Iran talks on resolving their conflict.

Revised demand outlook

The IEA's updated projection marks a significant downward revision from its previous estimate. The agency had earlier forecast a 1.6M BPD drop in world oil demand for 2026; the latest figure of 2.5M BPD represents a considerably sharper contraction in the global demand outlook.

The following table summarises the change in the IEA's 2026 world oil demand forecast:

US-Iran talks cited as key factor

The IEA attributed the sharper demand drop projection to the impasse in US-Iran talks on resolving their conflict. The agency did not provide additional quantitative detail on the specific mechanisms linking the diplomatic deadlock to the revised demand figure, based on the available source data.