• President Trump says refinery outages, not Strait of Hormuz transit risks, are now the primary driver of elevated gasoline and diesel prices.
  • Crude flows through Hormuz have rebounded to prewar levels, but damaged Russian refineries, export restrictions, and Middle East supply disruptions keep refined fuels tight.
  • The administration is weighing a diesel-export ban, though analysts warn it could backfire by reducing overall fuel output and raising gasoline costs.

From Crude to Refined: The Bottleneck Shifts

President Trump on Wednesday pointed to refinery disruptions as the main force pushing U.S. fuel prices higher, saying the Strait of Hormuz is no longer the key factor. "The oil is flowing," Trump said, according to remarks at a White House event, adding that refinery closures—including those in Democratic-led states like California—and Ukrainian attacks on Russian facilities are now driving costs at the pump.

The comments mark a shift in emphasis from crude-oil transit risk to a broader shortage of refined products, especially diesel. But market data suggests the story is not either/or. Crude flows through Hormuz have recovered sharply, with Kpler data cited in recent reports putting late-September volumes at roughly 19.5–22.5 million barrels per day, near or above prewar levels. That has eased fears of a crude-supply collapse.

Yet the return of crude shipments has not translated into cheaper retail fuel. Refined-product supply remains constrained: Ukrainian strikes have damaged Russian refining capacity, Russia has restricted diesel exports, and Middle Eastern refining and shipping remain disrupted. China reportedly curtailed refined-fuel exports for October. The result is a market where crude is available but the ability to turn it into gasoline and diesel is not.

Diesel Prices Hit Record Highs

The strain is most acute in diesel. AAA data cited in reporting showed a national average of $6.53 per gallon on September 22, a record, before easing to $6.41 by September 30. Gasoline prices also remain elevated, with California especially exposed.

U.S. distillate inventories were reported at 105.2 million barrels for the week ended September 25, about 13% below the five-year average for that week, according to the Energy Information Administration. Refineries are running at very high rates, but that does not eliminate regional bottlenecks or replace lost overseas supplies quickly.

"The core economic concern is that a refinery produces diesel, gasoline, jet fuel, and other products together," said one industry analyst who asked not to be named. "Discouraging diesel exports can change refinery economics and potentially reduce the incentive to maximize overall fuel output."

Trump acknowledged he is considering a U.S. diesel-export ban but noted it could raise gasoline prices. The tradeoff is delicate: restricting exports might retain more diesel at home, but it could disrupt relationships with fuel-importing allies and, if margins weaken enough, lead refineries to cut runs or shift production away from gasoline.

California's Isolated Market

California is central to the domestic political debate because of its specialized, relatively isolated fuel market and recent refinery capacity losses. Phillips 66 (PSX) ended crude processing at its Los Angeles-area refinery, with capacity of about 139,000 barrels per day, in late 2025. Valero (VLO)'s 145,000-barrel-per-day Benicia refinery reportedly ceased fuel production in April 2026.

The state's supply system has limited ability to draw replacement gasoline rapidly from the U.S. Gulf Coast, and overseas replacement barrels can take several weeks to arrive. That leaves California—and potentially neighboring Nevada and Arizona—vulnerable to outsized pump-price spikes.

Beyond the Pump: Economic Ripple Effects

Costly diesel matters beyond motorists. It feeds into trucking, rail, construction equipment, farming, shipping, and backup power, so sustained price increases can raise the delivered cost of groceries and other goods. The disruption is therefore more inflationary than a gasoline-only shock.

Stakeholder effects differ. Drivers face higher household transport costs, with the largest burden on lower-income and rural households. Truckers, farmers, and construction firms are hit hardest by diesel. Airlines and shipping firms face fuel-cost volatility and may pass some costs to customers. Refiners benefit from high margins when they can operate, but outages, export bans, and regulatory uncertainty can reduce flexibility.

The Group of Seven has reportedly agreed to release up to 100 million barrels of crude and refined products over four months. But such releases can only cushion a short-term shortage; they cannot permanently replace damaged refinery capacity or normal commercial exports.

What to Watch

Analysts cited in current reporting expect tight diesel conditions to persist into 2027 unless Russian refining capacity is restored, Middle Eastern product exports normalize, and China returns meaningful volumes to export markets. Further Ukrainian attacks, a prolonged Russian export restriction, or renewed conflict involving Iran could tighten the market again quickly.

A meaningful restoration of Hormuz shipping should help crude prices and eventually feed through to fuel markets, but it is unlikely to produce immediate relief where physical refinery capacity remains offline. California's refining closures could leave the state structurally more dependent on imports and more exposed to future supply disruptions.

The bottom line: Trump is correct that refinery disruptions are now a major driver of high fuel prices, particularly for diesel. But the world is still paying for the Hormuz disruption as well. Crude transport has improved, while refinery damage, product-export constraints, and residual geopolitical risk have shifted the bottleneck downstream—from oil supply to usable fuel supply.

Correction: An earlier version of this article misspelled the name of the Phillips 66 refinery. It is the Los Angeles-area refinery, not the Los Angeles refinery.