Even part of the Trump administration is predicting that U.S. gasoline prices will remain high for the rest of the year.
The U.S. Energy Information Administration, an arm of the Department of Energy, on Tuesday forecast that gasoline prices will hit an average monthly high of about $4.30 per gallon in April. Then it predicts the average price will sit above $3.70 per gallon for the year. And that’s if the conflict in Iran concludes by the end of the month.
Tristan Abbey, the EIA’s administrator and a Trump appointee, acknowledged in a press release that the agency is struggling to model how oil and gas markets will respond to the Strait of Hormuz closure.
“First, to even run our model we have to make an assumption about the duration of the Strait of Hormuz closure. Second, we know that the closure is forcing production to shut in, but we can only estimate these outages. Third, just as we had never before seen the strait close, we’ve never seen it reopen,” Abbey said in EIA’s Tuesday press release for its Short-Term Energy Outlook. “What exactly that looks like remains to be seen. Full restoration of flows will take months. Our modeling indicates that fuel prices will continue to rise until these variables resolve.”
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There is no clear plan to reopen the strait or end the conflict. And as the month-plus closure of the strait leads to steadily increasing gas prices in the U.S. and increasingly dire energy shortages in Asia and Africa, President Donald Trump has become increasingly angry in his threats.
On Easter Sunday, Trump called for the country to “open the fucking strait, you crazy bastards.” On Monday, he threatened to completely destroy the country’s power plants and bridges if no deal is reached by his Tuesday 8 p.m. ET deadline. And on Tuesday, he doubled down with the threat that “a whole civilization will die tonight.”
With so many unknowns about the status of the strait, the EIA has been forced to make a series of educated guesses for a report that in recent years had been quite optimistic about prices and fairly uncontroversial for the U.S. oil and gas industry.
The EIA predicted even more severe consequences for diesel prices than for gasoline: a high of more than $5.80 per gallon in April and an average of $4.80 for the year. While diesel doesn’t affect as many American consumers at the pump, increased diesel costs raise the price of shipping and trucking and eventually ripple through the economy, elevating prices for food and consumer products.
“Once flows through the Strait of Hormuz resume, we assume it will take time to resolve the backlog and disruption to oil tanker routes and trade flows and that the potential for future disruptions will remain at risk and create a premium in the oil price,” agency analysts wrote in the outlook.
The agency did not provide estimates of where prices might go if the conflict does not conclude by the end of April.
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Correction: A previous version of this story misnamed the Department of Energy branch that made the forecast. It is the U.S. Energy Information Administration.
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