Oil Is Up, but Refining Margins Are Why Gasoline Costs Keep Climbing
Brent crude futures settled at $97.31 a barrel on September 7, 2026, up $1.03 or 1.1%, a six-week high driven by new U.S. strikes on Iran and renewed Israeli threats against Tehran Reuters. The crude price move, though, tells only part of the story. Downstream — closer to the consumer end of the supply chain — a surge in the crack spread is the reason gasoline prices have risen for longer than crude prices since the U.S.-Iran war began MarketWatch.
The crack spread is the refining margin: the difference between what a refinery pays for crude oil and what it sells the refined products for. Think of it as the refinery's gross profit per barrel. When that margin widens, gasoline prices climb even if crude itself holds steady.
The pressure on refining margins traces to direct physical damage. Attacks on Gulf energy facilities took roughly 2.4 million barrels per day of refinery capacity offline across 20 Gulf coast plants, with refineries bearing the heaviest damage MarketWatch. A reported strike on fuel tanks at a refinery in Tehran on March 8, 2026 added to the conflict-driven supply erosion. That came on top of warnings from March 2026 that disruptions in oil flow through the Strait of Hormuz over a four-week period would trigger a sequential shock to global supplies MarketWatch. By August 2026, Reuters calculations showed almost half the world's oil was sourced from countries affected by conflict Reuters. Analysts warned in May that developed nations face energy scarcity amid the oil crisis MarketWatch.
The refinery system's ability to absorb these shocks was already diminished before the conflict escalated. The EIA's 2026 Refinery Capacity Report, published June 29, covered 130 operable refineries — two fewer than the prior year — reflecting a decrease in U.S. refining capacity during 2025 EIA. LyondellBasell's exit from refining operations contributed to that reduction. The EIA had projected in March 2025 that refinery closures combined with rising consumption would draw down U.S. petroleum inventories in 2026 EIA. This is the backdrop against which 2.4 million barrels per day of Gulf capacity went offline.
The EIA estimates that roughly two-thirds of the pump price of gasoline is attributable to the refinery acquisition cost of crude oil EIA. The remaining third captures refining margins, distribution, marketing, and taxes. When the crack spread widens, that residual third expands, and gasoline prices detach from crude movements on a proportional basis. That is precisely what has occurred. The crack spread surge means consumers are paying not just for scarcer crude but for scarcer refining throughput.
The EIA has previously noted that with little spare refinery capacity available during peak demand periods, unexpected outages can produce localized supply disruptions EIA. The current episode is national rather than local. Historical precedent shows the price sensitivity: in early 2024, U.S. refinery utilization fell 11%, dropping as low as 81% during the two weeks ending February 9 and February 16, pushing gasoline prices higher EIA. During the 2022 summer driving season, the EIA projected refinery utilization of 96% in June, 94% in July, and 96% in August, with inputs averaging 16.7 million barrels per day EIA. Utilization at those levels leaves no margin for disruption. The Gulf capacity loss from the Iran conflict dwarfs the seasonal tightness that drove those earlier price spikes.
For market participants, the crack spread is doing the heavy lifting on gasoline price inflation, not crude alone. Traders and refiners watch the spread between WTI (West Texas Intermediate, the U.S. crude benchmark) and RBOB gasoline futures as their key barometer. For consumers and policy makers, the relevant question is not when crude retraces but when Gulf refinery capacity comes back online. Neither outcome has a clear timeline. The U.S.-Iran talks referenced in April's damage assessment have not produced a durable cessation of hostilities, as the September strikes confirm. Meanwhile, the EIA's pre-conflict projection of inventory draws in 2026 assumed refinery closures and rising demand — not wartime damage to 20 Gulf coast plants.
The broader context here is that the structural shift matters beyond the immediate price spike. A refined products market where nearly half of global crude supply originates in conflict zones, and where the marginal barrel of refining capacity is offline due to physical damage rather than maintenance or economics, reprices not just the level of fuel costs but their volatility. Gasoline prices that historically tracked crude with a predictable lag and proportionality are now responding to refinery-level supply constraints that can persist independently of crude market dynamics. That decoupling is the story beneath the headline crude number.
