Overview
- Paul Krugman argued on Friday that President Trump’s Iran campaign has become a stalled quagmire and that headline crude around $100 understates consumer pain because of rising refining margins.
- The crack spread — the price gap between a barrel of crude and the fuels refined from it — has climbed from about $25 to more than $65 per barrel, which analysts say makes the effective cost to end users closer to $140 per barrel.
- A global shortage of refining capacity and lower inventories have amplified the crack spread by limiting the ability to turn crude into gasoline and diesel, keeping product prices high even when crude supply looks steady.
- Houthi attacks on shipping routes in the Red Sea and reports of a U.S. military surge into the Middle East increase the risk of fresh supply disruptions and higher shipping and insurance costs that would further raise fuel prices and delivery delays.
- The combined effects of higher consumer fuel bills, new U.S. tariffs, and the refining bottleneck raise the odds of renewed inflation and higher interest rates, squeezing household budgets and shaping OPEC+ and market decisions.