Gasoline and diesel futures experienced significant gains on the first trading day following attacks by the US and Israel on Iran, raising the possibility of erasing one of the most prominent successes of the Trump administration's energy agenda. On Monday, gasoline futures surged by as much as 9% as tankers carrying crude oil and fuel nearly halted transit through the Strait of Hormuz. According to data from the American Automobile Association, the US national average retail price for gasoline rose to $3 per gallon on Sunday, reaching its highest level in three months.
When discussing US energy dominance, President Trump has frequently highlighted the decline in gasoline prices. Last week, he claimed that prices in most states had fallen below $2.30 per gallon, even though the national average was $2.98. While it remains uncertain how long the current price trend will last, rising fuel costs could present a significant obstacle for Trump and the Republican party, especially with midterm elections approaching later this year. Patrick De Haan, Head of Petroleum Analysis at GasBuddy, stated in an interview, "Americans have very firm views on what they should pay for gasoline. This could indeed become a political liability."
Global crude oil futures recorded their largest single-day increase in four years on Monday, climbing as much as 14% during the session. Since crude oil accounts for roughly half of what drivers pay at the pump, gasoline prices typically follow suit when oil prices rise rapidly. This phenomenon is often referred to as the "rocket and feather effect." Christopher Knittel, a Professor of Energy Economics at MIT, explained, "When prices go up, they tend to go up very quickly."
An anonymous source familiar with the matter reported that a chain of gas stations on the US East Coast raised prices by 15 cents per gallon over the weekend. Diesel prices also jumped, with futures rising up to 17% and retail prices exceeding $3.75, the highest level in over three months.
In recent months, Republicans have already been on the defensive due to rising electricity costs. However, gasoline prices, being one of the most visible indicators of inflation, are particularly sensitive politically. Voters often place blame on the White House when prices increase. White House Press Secretary Levitt stated that the Trump administration's policies have driven US oil production to record levels and contributed to increased output from Venezuela. In an email, Levitt said, "The Department of Energy and the Treasury Department will continue to monitor oil market developments closely and do everything possible to maintain price stability."
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