Diesel Hits $6 a Gallon: Why Fuel Prices Exploded and Who Controls the World's Oil Routes
The national average price of a gallon of diesel passed six dollars this month. That has never happened before in the United States. Today, three things. First, the two narrow stretches of water that carry the world's oil, and who controls them now. Second, what has happened to the price at your pump, and why diesel got hit harder than gasoline. Third, the missiles this country is spending to keep those waterways open, and how many are left.
Start with who is doing this, because the name gets used on the news every night and almost nobody explains it.
The Houthis call themselves Ansar Allah. They are an armed political movement built around one extended family from Saada, in the far north of Yemen. They belong to a branch of Shia Islam called Zaydism that exists almost nowhere outside northern Yemen. Zaydi imams ruled that part of the country for about a thousand years until a coup ended it in nineteen sixty-two.
The movement started in the nineteen nineties as a religious revival among young Zaydis who felt their tradition was being pushed aside. It went armed in two thousand four after the government killed its founder. Six wars followed. In twenty fourteen they walked into the capital and took it. A Saudi-led coalition went in the following year, and that war has been running ever since.
They now run the government over most of Yemen's population. The United States lists them as a foreign terrorist organization. Their official slogan calls for death to America and death to Israel. Iran arms them and funds them.
Starting in late twenty twenty-three they began attacking commercial ships in the southern Red Sea, saying they were acting in solidarity with Palestinians in Gaza. Hapag-Lloyd, Mediterranean Shipping Company, Maersk, the oil major BP and the tanker group Frontline all pulled their vessels off the Suez route and sent them around Africa instead. Freight rates jumped and voyages got longer. That was the Houthis shooting at ships from the shore.
What happened this week is different. Now they hold the shore.
Last Thursday the Houthis took the port city of Mocha on Yemen's Red Sea coast. On Friday they crossed by boat and took Perim, the island sitting in the middle of the Bab el-Mandeb strait. The government troops holding that island had pulled out the night before.
The Bab el-Mandeb is eighteen miles wide at its narrowest point. Perim island splits that gap into two shipping lanes, one for traffic heading in and one for traffic heading out. Whoever holds the island looks down on every ship that passes.
That strait is the southern door to the Suez Canal. A ship coming up from Asia has to pass through the Bab el-Mandeb to reach the canal at all. About twelve percent of all global trade moves through that gap. In June, according to the tanker tracking firm Kpler, about seven percent of the world's total oil production went through it.
Perim is not the only piece of ground that changed hands. Earlier in the week the Houthis reached the Hanish Islands, which sit north of the strait between the ports of Hodeidah and Mocha. Whoever holds those islands has a clear view of every vessel coming up from the south. The Houthis have held Hodeidah for years and used it as the base for the whole shipping campaign.
The African side of the strait belongs to Djibouti and Eritrea. Djibouti hosts foreign military bases from several countries, including the only overseas base Japan has anywhere in the world, which Tokyo opened there in twenty eleven precisely because of that water.
The Houthis held Perim once before, back in twenty fifteen. It took a Saudi-led coalition with ground troops, naval gunfire and air support to push them off. This time the Yemeni units on that coast simply came apart.
A Western official told CNN why. The army battalions posted on that coast stood at about twenty percent of their paper strength. The other eighty percent were names on a roster collecting a salary every month. When the Houthis came down the coast, the men were not there.
Neither were the crews for the equipment. American-built armored trucks were left sitting where they were parked, along with a pile of Emirati patrol vehicles. The Houthis are driving them through town on camera now. Those men did not have the numbers to hold the ground, and they did not have the numbers to drive the equipment out either.
Yemeni generals spent Thursday morning on the phone asking for air cover. A senior Yemeni military source says he called Central Command and was told the Saudis were on the way. Nothing came. Mocha fell that day. One official called the whole thing a screw-up of epic proportions.
Saudi Arabia answered with airstrikes on the Mocha airport and on Dhubab, the town sitting on the strait itself. The Houthis fired dozens of ballistic missiles and drones back into southern Saudi Arabia, wounding seventy-three people. The Houthis have also declared a naval blockade against Saudi Arabia, which is the largest oil exporter on the planet.
The Saudi crown prince called President Trump twice last week. The first call was to brief him on the Houthi advance. The second, hours later, was to ask the United States to run strikes of its own. He was turned down. The Central Command commander flew to Saudi Arabia on Friday anyway to coordinate.
There is a question underneath all of this, which is how a militia that was fighting in the mountains a decade ago is now taking ports on the coast.
Two Iranian sources told Reuters that Tehran instructed the Houthis last week to hit Saudi Arabia. Iran promised more money and more weapons, and sent several Revolutionary Guard commanders to Yemen to help coordinate. Separate Yemeni, Iranian and regional sources told the same news agency that the push down the coast came with direct guidance from the Guard.
When the Saudis sent a warning to Tehran through Pakistan, the answer that came back was that Iran does not control the Houthis. Both of those accounts cannot be right.
The weapons do not arrive on cargo ships out of Iranian ports anymore. They move in small boats through drop points in Djibouti, the Horn of Africa and southern Arabia. Yemen's coast guard stopped one of those boats in late August carrying drone components out of Djibouti. The government side says the same network ran more than a dozen shipments out of the Iranian port of Bandar Abbas.
The Houthis also started this round well supplied. They have a decade of weapons stored in the mountains, and they build their own missiles and drones from smuggled parts.
Taking Mocha did not require any of that. It was a ground fight, and the other side was hollow. The United Arab Emirates had been the backbone of the anti-Houthi forces on that coast, and it pulled every one of its troops out of Yemen in January after a falling out with Saudi Arabia. A senior Yemeni officer told the Associated Press he was stunned the Saudis did not bomb the Houthis as they moved on Mocha.
That is one end of the water. Look at the other end.
The Strait of Hormuz sits at the mouth of the Persian Gulf. In an ordinary year about a quarter of the world's seaborne oil passes through it. Since the war with Iran began in late February, traffic through Hormuz has been at a near standstill.
The Energy Information Administration published its monthly outlook on September ninth. The agency expects oil flows out of the Middle East to stay constrained through the end of this year, with shut-in production averaging about five point seven million barrels a day in the final quarter. Shut in means the oil is in the ground, the wells could pump it, and there is no way to get it to a buyer.
Brent crude averaged ninety-one dollars a barrel in August, seven dollars higher than July. The price went up because the barrels could not get out.
Saudi Arabia had a way around Hormuz. The East-West pipeline runs clear across the country, from the oil fields in the east to the port of Yanbu on the Red Sea coast. With Hormuz shut down, that pipeline has been moving about five million barrels a day.
On Friday it was hit. Projectiles struck the pumping stations and Saudi Arabia shut the line down. A United States official says the drones came out of Iraq. Satellite photographs show heavy fire damage at one of the stations. Nobody has claimed the attack.
The day after that, the Houthis took Perim. Every tanker loading at Yanbu sails south past that island on the way to Asia. One pipeline was the workaround for the first strait, and the second strait is the exit that pipeline feeds.
Here is the other side of it, because the traffic is not simply stopping.
Shippers are finding ways through. Cargo is moving overland, through pipeline bypass routes, and from ship to ship out at sea. The United Arab Emirates has new bypass pipeline capacity expected to come online in the middle of twenty twenty-seven. The Energy Information Administration expects Middle East flows to climb back gradually as those workarounds take hold.
Vessels that will not risk the Red Sea go the long way, around the southern tip of Africa. That adds ten to fourteen days to the voyage. The cost of those extra days ends up in the price of whatever is inside the container.
Traffic through the Bab el-Mandeb was already down about sixty percent from where it stood in twenty twenty-three, when the Houthis started shooting at commercial ships. The industry has been adjusting to that gap for almost three years.
Put numbers on what that cost. The shipping campaign started on November nineteenth of twenty twenty-three, when Houthi forces seized a vessel called the Galaxy Leader off the Yemeni coast. Since then more than a hundred merchant ships have been targeted. Four have been sunk. One was seized outright. At least eight merchant sailors have been killed doing an ordinary job on an ordinary ship.
Before any of that, the Suez Canal handled about eighty container ships a week. By the middle of January this year the number was twenty-six.
Egypt takes a toll on every vessel that transits the canal, and that money is one of the biggest sources of foreign currency the country has. In twenty twenty-three the canal brought in a record of about ten point two billion dollars. In twenty twenty-four it fell to roughly three point nine billion, a drop of sixty-six percent. In May the Egyptian president put the total loss since the attacks began at around ten billion dollars.
Egypt had started to climb back out. Canal revenue for the fiscal year that just ended came in at four point six seven billion dollars, up twenty-three percent, with vessel numbers up ten percent and tonnage up twenty-two. Cairo raised transit surcharges in July to capture a little more of the returning traffic. That recovery was built on the assumption the southern end of the Red Sea was getting safer.
Then there is the insurance, which is the fastest signal in the whole business. War risk premiums for a Red Sea voyage sat at about three tenths of one percent of a ship's value before the Houthis announced their blockade in July. They went to three quarters of one percent within days, and then above one percent for voyages through the southern end. On a large vessel that is hundreds of thousands of dollars added to a single trip, and the shipper does not absorb it. The customer does.
One detail worth holding onto. A Chinese-owned tanker went through the Bab el-Mandeb without trouble during the blockade. A risk analyst at Verisk Maplecroft read that the same way anybody would, which is that the blockade is aimed at ships tied to Saudi and Western interests, exactly as the earlier campaign was. Beijing's cargo sails. Everybody else pays the premium or goes around Africa.
Two narrow openings in the water. Iran holds one. Iran's proxy now holds the other. That is the supply line for a large share of the world's oil, and both ends are in the hands of people who want it closed.
On Friday, September eleventh, AAA reported that the national average price of a gallon of diesel had passed six dollars for the first time in American history. The number was six dollars and six cents. GasBuddy, which tracks prices as they change, had called it the day before. It was the third record set in a single week.
One year ago that same national average was about three dollars and seventy cents. The price has gone up roughly two dollars and thirty-five cents a gallon in twelve months.
That is the national average, and almost nobody actually pays the national average. California came in at seven dollars and ninety-eight cents, the highest in the country. Washington state and Hawaii were both above seven dollars. At the other end, Oklahoma was five dollars and sixty cents, with Louisiana and Mississippi close behind. Whether you are looking at a number that starts with a five or a number that nearly starts with an eight depends entirely on which state you fill up in.
Regular gasoline is running about four dollars and twenty-seven cents nationally, and it has been climbing since July.
That spread between states is not the war. That gap was there before any of this started. California charges the highest fuel taxes in the country and requires its own special fuel blend that nobody else uses, which means fuel made for California can only be sold in California. Washington and Hawaii carry their own costs on top. Oklahoma, Louisiana and Mississippi sit next to the refineries on the Gulf Coast and tax fuel lightly. The war raised the floor everywhere. The distance between the floor and the ceiling is state policy.
Diesel matters in a way gasoline does not. Gasoline is what a person buys. Diesel is what the country runs on. Every long-haul truck, every freight train, every tractor, every combine, every piece of construction equipment and most delivery vans burn diesel. When diesel goes up, the cost rides along on every item in every store, because the item got there on a truck.
A tractor-trailer averages between six and seven miles to the gallon. On a two thousand mile run that is roughly three hundred gallons. At three dollars and seventy cents that trip cost about eleven hundred dollars in fuel. At six dollars and six cents it costs about eighteen hundred. That difference does not come out of the trucking company. It goes into the freight rate, and the freight rate goes into the shelf price.
Now the part most coverage skips. Crude oil is not the whole reason diesel is where it is. The refineries are.
Crude in the ground and crude on a ship is not fuel. It has to be run through a refinery and split into gasoline, diesel, jet fuel and everything else. Valero estimates the wars in Iran and Ukraine have knocked about five million barrels a day of refining capacity offline worldwide. Damaged plants, plants with no crude to run, plants in places nobody will insure.
The chief executive of Exxon said in July that refining constraints have created a disconnect between crude prices and pump prices. That is the whole problem in one sentence. More oil coming out of the ground does not automatically mean cheaper fuel, because the bottleneck is not the oil. The bottleneck is the machinery that turns oil into diesel.
Diesel gets hit harder than gasoline for a second reason, which is the calendar. Fall is normally when gasoline prices fall and diesel prices rise. Heating oil is nearly the same product as diesel coming off the same equipment, and refiners shift toward it as the weather turns. This year the seasonal squeeze landed on top of a war.
The timing is worse than a calendar note. Harvest runs now. Every combine in the Midwest, every grain truck hauling to the elevator, every dryer running on propane or diesel, all of it is happening in the weeks when the fuel is at a record. A farmer cannot wait for a better price. The crop comes out of the ground when it is ready or it is lost.
The heating season starts right behind it. Households across the Northeast heat with oil, and that oil comes off the same refinery run competing for the same barrels as the trucks.
Here is what is being done about it.
On September first the President met refiners and fuel distributors at the White House, along with Interior Secretary Doug Burgum and Energy Secretary Chris Wright. The subject was near-term ways to add refining capacity. Reuters reported that Exxon, the third-largest refiner in the country, was not invited to that meeting.
The bigger move is where the oil itself is coming from. Burgum says production is shifting away from the Middle East and toward this hemisphere, and the numbers back him up. Brazil, Guyana and Argentina are now supplying about half of the world's expected growth in oil production outside OPEC. Looking further out, roughly sixty percent of all new conventional oil under development through twenty thirty sits outside the OPEC-plus group. South America is the single biggest source of that new supply.
The United States is still the largest oil producer in the world. American output is forecast to average about thirteen and a half million barrels a day this year, which is slightly down from last year as gains in the Permian Basin, Alaska and the Gulf are offset by declines elsewhere.
In late August the administration announced a deal giving the United States majority control over more than sixty-five billion barrels of Venezuelan reserves.
There is one more piece that decides when this ends, and almost nobody talks about it. The world keeps stored oil in tanks, and those tanks have been draining. The Energy Information Administration estimates global inventories fell by an average of three point nine million barrels a day in the second quarter of this year, another three million a day in the third, and expects another one point seven million a day in the fourth.
The American cushion is thinner than most people know. The Strategic Petroleum Reserve is the emergency stockpile the government holds in salt caverns along the Gulf Coast. As of the last week of August it held about two hundred and eighty-six million barrels. Its authorized capacity is seven hundred and fourteen million. That is roughly forty percent full, and the lowest level since the early nineteen eighties. It has dropped by something over a hundred million barrels since March.
Depending on which week you look at and which agency is reporting, you will see that number quoted anywhere from two hundred and eighty-six million up to about three hundred and eleven million, because it has been falling steadily all summer. The direction is not in dispute.
There is a floor underneath that stockpile, and it is not political. Engineers put the practical operating range at somewhere between two hundred and fifty and three hundred million barrels. Below that band the salt caverns, the pumps and the rate at which oil can actually be drawn out start to degrade. The reserve is already sitting inside that band. A reserve that low is one less shock absorber the next time something happens.
Refilling it is not a decision somebody makes on a Tuesday. The reserve can release oil far faster than it can take oil back in, and buying barrels in volume pushes the price up while you are doing it. A serious refill runs years and it needs cheap oil to work, which is the one thing nobody has right now.
All of that is why the price does not drop back the week the ships start moving again. The tanks have to be filled before anybody feels relief, and filling them means buying more oil than the world is burning for a long stretch. The Energy Information Administration says plainly that prices stay elevated until the flows return to normal and the storage is replenished.
The diesel picture specifically is tighter than the crude picture. Distillate inventories, which is the category covering both diesel and home heating oil, have been running about ten to thirteen percent below the five-year average. The Energy Information Administration has said out loud what a shortage like that does. Thin distillate stocks raise the risk of higher prices and wild price swings whenever supply gets disrupted, and the agency named the two worst windows for it. Those are the same two windows the country is standing in right now.
Two honest cautions on all of that. The shift toward this hemisphere was forecast before this war started. Guyana and Brazil were already projected to carry most of the new supply growth, so the war accelerated something that was already moving. An oil field is also not a faucet. From a discovery to a barrel on a ship runs years, not months. None of this lands on the pump price before winter.
Iran closed a strait to squeeze the world. The world went and started buying its oil somewhere else. That bill gets paid at your pump first, and theirs later.
A few days ago the commander of Central Command, Admiral Brad Cooper, sat down with CBS. He was asked about the shortage of munitions, specifically the interceptors used against Iranian missiles and drones. His answer was that he is not concerned at all, and that American forces are well armed and ready for any contingency.
The reporter's next question mattered more than the answer. She pointed out that he himself had testified before Congress about that shortage.
Here is what has been reported about the stockpiles, and every one of these figures comes from an outside analysis or from officials speaking to reporters, not from a public Pentagon count.
The Center for Strategic and International Studies estimates the Patriot interceptor inventory has fallen from roughly two thousand two hundred before the war to fewer than eight hundred and forty. The same analysis puts THAAD interceptors down from about four hundred and fifty to roughly two hundred and fifty. Sources told CNN the government's own internal numbers sit close to those outside estimates, and that senior commanders have described the stockpile as dangerously low.
Patriot production runs at about twenty new interceptors a month.
Those are Army systems, and they are being spent on two jobs. One is protecting American bases in the region from Iranian ballistic missiles. The other is helping defend Israel against the same missiles. Every one fired at either job is one that is not in the rack for the next one.
The Navy keeps a separate stockpile, and that is the one being spent over the water.
In January of twenty twenty-five, Vice Admiral Brendan McLane put a number on it in public. Between October twenty twenty-three and January twenty twenty-five, American warships defending shipping in the Red Sea fired one hundred and twenty SM-two interceptors, eighty SM-six interceptors, one hundred and sixty rounds of five-inch gun ammunition, and about twenty Evolved Sea Sparrow and SM-three missiles. Nearly four hundred munitions in fifteen months.
In that same stretch the Navy fired more defensive missiles than it had in the three decades following Desert Storm. Against an enemy with no navy.
The manufacturer of the SM-six builds somewhere between one hundred and twenty-five and two hundred of them a year. A destroyer carries ninety to ninety-six launch cells total, shared across every mission it has. Once those cells are empty the ship has to leave station and go get reloaded.
The cost side is worse than the count. An interceptor costs somewhere in the low millions. A one-way attack drone costs a few thousand. Shooting one down with the other is a trade the Houthis are happy to keep making all day.
Connect the three pieces and the whole picture shows up. Iran closing Hormuz is what shut in the oil. Iran firing ballistic missiles at bases and at Israel is what is burning through the Army's Patriots and THAADs. The Houthis closing the other strait is what the Navy's SM-twos and SM-sixes are shooting at. One war, three drains, and the price of diesel sitting at the end of it.
There is a cost to running short that is not measured in dollars.
On July seventeenth, Iranian missiles hit the Muwaffaq al-Salti air base in Jordan. They came down on a housing area where American troops were sleeping. Three were killed and four were wounded. The base was hit three times inside twenty-four hours. Those were the first American deaths since the ceasefire in April.
Last week the Wall Street Journal reported that United States officials have linked high resolution satellite imagery obtained by Iran from Chinese companies to that strike. Iran had pictures of the base taken before the attack and after it. Officials did not name the companies and did not say the Chinese government was directly involved. Beijing has rejected the whole thing and demanded proof.
This is not the first time. Washington sanctioned a Chinese satellite firm in twenty twenty-three for feeding imagery to Russia's Wagner Group. The State Department named the same company again in twenty twenty-five for helping the Houthis aim at American warships. Beijing did nothing either time. Officials are now also worried the same help is being used to track American ships at sea, and Iran's ability to target moving warships has visibly improved.
Every one of those interceptors exists so that the missile does not land on the housing area. Three times in Jordan, it landed.
The rebuilding is real and it is bigger than most people know.
In January the Pentagon and Lockheed Martin signed a seven-year framework agreement to raise PAC-three production from about six hundred interceptors a year to two thousand a year by twenty thirty. The first contract under that agreement came in April, worth four point seven billion dollars. Lockheed had already raised PAC-three production more than sixty percent over the previous two years, and delivered more than six hundred in twenty twenty-five.
In July, L three Harris took a separate award from Lockheed, also worth four point seven billion dollars, to build the propulsion systems, which will nearly triple its own output on that line. Boeing set production records on the seeker, the part that lets the interceptor find what it is chasing, delivering more than five hundred in a single year.
Lockheed also introduced a new interceptor in July called the PAC-three ACE, built to cost less than half what the current round costs. It uses the same fire control system and the same command network, so an ally already running Patriot can buy the cheaper round without building a new system around it.
On the Navy side, funding for Standard Missiles jumped from one point two six billion dollars to eight point five billion between this fiscal year and next. The Missile Defense Agency and the Navy have requested five hundred and forty SM-six and two hundred and fourteen SM-three missiles in that budget.
The allies are not sitting still either. Eighteen countries field the Patriot system. At the NATO summit this year, the United States, Germany, the Netherlands, Poland and Sweden agreed to look at building a dedicated Patriot maintenance facility in Europe, which would keep European interceptors on the continent instead of shipping them back across the Atlantic to be serviced.
That matters more than it sounds. Ukraine has been drawing on the same Patriot line for years, against Russian ballistic missiles that the Patriot is one of the few systems in the world able to stop. European governments have been buying batteries and rounds off that same production floor to cover their own skies. Every ally that builds its own maintenance capacity, or buys the cheaper round instead of the expensive one, takes a little pressure off a line that has been running flat out for four years.
Lockheed says it delivered more than twenty-four thousand missile and fire control products to the United States and its allies last year, which is the scale of what one company is carrying.
Now the part that money does not fix. Analysis of the production timelines says the SM-six will not be back to its pre-war depth until twenty twenty-eight or twenty twenty-nine. The PAC-three gets there around the middle of twenty twenty-nine. THAAD runs to late twenty twenty-nine. The Tomahawk gets to about twenty thirty. An advanced interceptor takes roughly two years from the start of component production to a finished round on a truck.
Lockheed delivered six hundred and twenty interceptors last year. Spread across the American military and every ally that buys from the same line, that is under two missiles a day for the entire free world.
The other half of the answer is not building more expensive missiles. It is refusing to spend an expensive one on a cheap target. The Navy has been pushing gun rounds, electronic jamming and cheaper counter-drone weapons forward specifically so a two million dollar interceptor is not the first thing fired at a twenty thousand dollar drone. Every drone knocked down by a gun or a jammer is a missile still in the rack.
There is one more reason this matters, and it has nothing to do with the Middle East. The Pentagon's entire plan for a fight in the Pacific runs on these same weapons. The Patriot, the THAAD and the SM-six are what would defend Guam, Japan, the Philippines and every American ship in that ocean. The magazines being emptied over Yemen and Israel are the same magazines that would have to be full for China.
The administration's position is that none of this is a problem. The President has said the country has virtually unlimited munitions and called the reporters covering the shortage treasonous scum. The Pentagon says the military has everything it needs.
The commander of Central Command says he is not concerned. He also testified about the shortage before he said that. Both of those cannot be true at the same time, and the production schedule is the tiebreaker. Factories do not care what anybody says on television.
That is everyone knows. The hard truth, the stuff nobody else will say, and the thing that keeps you going.
I am Brian Bullock of starborn studios. Find me on X at Everyoneknows1. If this hits you share it with someone who needs to hear it. Subscribe. leave a review. Come find us at brianbullockwriter.com
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