US President Donald Trump stated on social media that the rising gas prices are no longer due to the Strait of Hormuz, as record oil production is occurring almost daily. The real issue is "refineries": Russian refineries are being destroyed by Ukraine, while US refineries are being shut down by Democrats, whom he refers to as "Dumocrats," in blue states like California.

This shift in blame comes as midterm elections approach and domestic fuel prices are under pressure, moving the focus from the US-Israel war against Iran and the Strait of Hormuz to the refinery sector. According to the American Automobile Association, the national average price for regular gasoline is $4.36 per gallon, up from $4.14 a month ago and higher than the $2.98 on February 28, the day the US and Israel first struck Iran. The Strait of Hormuz typically handles about one-fifth of global oil transport, and after Iran previously cut off passage, both crude oil and refined product prices rose simultaneously.

The Ukrainian Defense Ministry reported that long-range strikes have caused over 51% of Russian refining capacity to be offline, specifically naming Moscow, Yaroslavl, Perm, Ilyinsky, Saratov, Sezlan, KINEF in Kirishi, and Ustyug. This claim has not been independently verified. Russian President Vladimir Putin acknowledged on October 1 that the attacks have resulted in about a 1% loss of GDP, stating that Ukraine has "partially" achieved its economic disruption goals. The International Energy Agency estimates that Russian diesel production has decreased by about 30%, with some gas stations experiencing wait times of up to 40 hours.

In the US, Phillips 66 will close its Wilmington refinery in Los Angeles by the end of 2025, with a processing capacity of about 139,000 barrels per day. Valero will shut down its Benicia refinery in the Bay Area in April 2026, with a capacity of about 145,000 barrels per day. Together, these two refineries account for about 284,000 barrels per day, approximately 17% of California's refining capacity and less than 2% of the national refining capacity. Phillips 66 attributes the closure to high production costs and low profitability, while Valero also cites state regulations and maintenance costs. California's refined oil pipeline network is not connected to the Gulf Coast refining centers and uses a specialized gasoline formula, making it difficult for out-of-state refineries to immediately replace them.

In September, the White House convened Marathon Petroleum, Phillips 66, Chevron, Delek, PBF Energy, and Valero to discuss expanding refining capacity. Diesel prices have risen more than gasoline: at the beginning of September, the national average diesel price reached $5.85 per gallon, a record high; by the end of September, the Washington Post cited the American Automobile Association stating that regular gasoline was about $4.43 and diesel about $6.41. The refining crack spread has widened, with Marathon, Valero, and others reporting record profits.

This is an event-driven shortage of refined products, not just a crude oil story. Buyers include transportation companies, airlines, and end drivers, while sellers are the still-operating refineries and diesel traders. The flow of crude oil through the Strait of Hormuz has returned to pre-war levels, but damage to Middle Eastern refineries continues to hinder the export of refined products, with money flowing towards the crack spread rather than upstream oil companies. Beneficiaries are coastal refineries and those with high operational rates, while those under pressure include California's isolated market, diesel-dependent logistics, and the ruling party that is using oil prices as a midterm election issue.

Source: Public Information