Katerina Swanson
Fuel prices are a significant concern for consumers, with fluctuations in cost impacting household budgets and travel plans. In the United States, fuel prices have been steadily rising, with the national average for a gallon of regular gasoline reaching $3.26 in April 2025, up from $3.14 in June 2025. Similarly, in the United Kingdom, energy prices have been volatile, with a 7% drop in prices on July 1, 2025, providing some relief to households. However, international tensions and market volatility contribute to ongoing uncertainty, and predictions for future fuel prices remain subject to change. With global events and economic disruptions influencing fuel prices, it is challenging to predict how much prices will rise or fall in the coming months.
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What You'll Learn
The conflict between Israel and Iran
Fuel prices in the US have been steadily rising, with the national average for a gallon of regular gasoline increasing by over 10 cents to $3.26 in April 2025. This is a significant jump, although prices remain below what they were in 2024. The US fuel market varies across states, with California being the most expensive ($4.91) and Mississippi the least ($2.74).
Now, onto the topic of the Israel-Iran conflict.
The conflict resulted in significant consequences, including Internet blackouts, tightened censorship, and the displacement of tens of thousands of Iranian civilians. Israel declared a state of maximum alert, urging civilians to remain in shelters and implementing precautionary measures such as prohibiting public gatherings and canceling flights. A ceasefire was eventually reached on June 24, 2025, following diplomatic efforts led by the United States. However, the underlying tensions and differences between the two countries remain, and the potential for future conflict persists.
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Refinery maintenance
The impact of refinery maintenance on fuel prices was evident in early 2025 when refinery maintenance and outages on the West Coast of the US created a ripple effect, pushing fuel prices higher in neighbouring states. This trend is expected to continue as refinery maintenance spreads to other regions, and the transition to summer gasoline blends further increases prices.
The effect of refinery maintenance on fuel prices is more pronounced when unplanned shutdowns occur. Unplanned shutdowns can be due to emergencies such as fires or power outages, or they can be the result of issues discovered during planned maintenance. These shutdowns can lead to unexpected supply disruptions, particularly during peak demand periods, resulting in temporary price surges.
The complexity and size of refinery maintenance operations leave little room for flexibility in changing plans. The labour, equipment, and materials required for process improvements are significant commitments, and safety concerns often take precedence. As a result, variations in production due to outages can be substantial, affecting fuel supply and prices.
The impact of refinery maintenance on fuel prices is not limited to local or regional markets. In the case of larger refineries or widespread maintenance, the effects can be felt on a national or even global scale. The Motiva Port Arthur and Marathon Galveston Bay refineries in the US, which together account for about 7% of total US capacity, underwent maintenance in 2025, impacting fuel production and contributing to upward pressure on gasoline and diesel prices.
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Seasonal shifts
Fuel prices fluctuate due to seasonal changes in demand and supply. Summer often brings a rise in gasoline demand as people travel more, while winter sees a surge in demand for heating oil and natural gas as temperatures drop. These shifts can cause temporary imbalances in supply and demand, affecting fuel prices.
For instance, in the Northern Hemisphere, including Europe, North America, and parts of Asia, the cold season from November to February leads to increased consumption of heating fuels. Investors who anticipate these shifts can make informed decisions and adjust their strategies accordingly, taking advantage of pricing trends during peak seasons.
Similarly, gasoline prices tend to gradually rise in the spring and peak in late summer when driving increases. However, external factors like weather anomalies and severe weather forecasts can disrupt these patterns, leading to unexpected shifts in demand and price.
Seasonal trends also impact long-term investments. Investors who understand the market dynamics of seasonal demand can align their investments with natural cycles, maximizing returns. They can buy ahead of expected price increases and sell before demand decreases, avoiding potential price drops.
Additionally, supply-side factors influence seasonal shifts in fuel prices. Production rates, reserve levels, and import or export activities can amplify or mitigate the effects of seasonal demand. For example, if reserves are low or production faces weather-related challenges during the winter, prices may rise even higher.
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International tensions in the Middle East
Fuel prices are expected to rise, with some states already experiencing an increase in fuel prices. For instance, in April 2025, the national average for a gallon of regular fuel in the US increased by over 10 cents to $3.26. This is, however, still lower than the prices in 2021 and 2022, which surged due to supply shocks caused by the pandemic and Russia's invasion of Ukraine.
The Strait of Hormuz, a critical chokepoint for Middle Eastern exports of oil and gas, has been at the center of concerns. About 20-30% of the world's oil supply passes through this strait, and a blockade could have significant implications for prices. During periods of heightened tensions, there were fears that Iran might block the strait, as suggested by Iran's parliament approval to close the channel. However, the presence of the US Navy's Fifth Fleet in Bahrain has diminished the likelihood of a full-scale blockade.
The conflict between Israel and Iran has also impacted the eastern Mediterranean gas fields, such as Tamar, Leviathan, and Karish, which supply Israel and neighboring countries. In 2024, the Israeli government temporarily halted production from these offshore assets due to security concerns. Iran has further threatened to target Israel's offshore gas fields and energy infrastructure in an escalating conflict.
The impact of Middle Eastern tensions on fuel prices is mitigated by other factors. The United States, being the world's largest oil producer, has lessened the world's dependence on crude oil from the Middle East. Additionally, OPEC+ has struggled to bring barrels back onto the market due to weaker oil demand and robust non-OPEC+ supply. As a result, the market is well-supplied, reducing the risk of significant price increases.
While the conflict in the Middle East has caused fluctuations in oil prices, it has not sparked an oil crisis. The market has shown resilience to geopolitical shocks, and prices have not skyrocketed as they did during the Russia-Ukraine conflict.
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UK price cap
The energy price cap in the UK is reviewed and set every three months by Ofgem, the energy regulator. The price cap limits the maximum price that can be charged per unit of energy for standard variable tariffs. The cap applies to those who pay by direct debit, cash or cheque, but it does not include prepayment meters, which have a separate cap.
The price cap for the summer of 2025 (July to September) was set at £1,720 per year for a typical dual-fuel household, which was a reduction from the previous cap of £1,849 in the previous quarter (April to June). This drop provided some relief to households as it lowered electricity bills during the summer heatwave.
The price cap is expected to rise again in October 2025, with predictions of a small increase of 0.4% to 1%. The consultancy Cornwall Insight, known for its accurate predictions, expects the price cap to be around £1,698 per year for a typical dual-fuel customer. However, they caution that there is significant uncertainty until the final figure is announced.
The primary driver of price cap changes is the wholesale cost of energy, particularly gas, which is bought and sold on the global market. Geopolitical tensions, such as the conflict in Ukraine and the Middle East, have impacted wholesale gas prices. Additionally, the weather plays a role, with colder temperatures leading to higher gas consumption and putting pressure on prices.
To address the volatile energy market and reduce dependence on global gas prices, the UK government and Ofgem are focusing on investing in upgrading domestic energy infrastructure and transitioning to more homegrown low-carbon sources of electricity. These measures aim to stabilise energy prices and reduce the country's reliance on imported fossil fuels.
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Frequently asked questions
Fuel prices are influenced by various factors, including geopolitical tensions, supply and demand, and government policies. As of July 2025, UK energy prices had dropped by 7% due to a price cap, providing relief to households. However, forecasts beyond autumn 2025 remain uncertain.
Geopolitical tensions, such as the conflict between Israel and Iran, can impact oil prices. For example, if the Strait of Hormuz, an oil corridor for about 20% of global crude oil, is blocked, prices could soar.
Fuel prices can vary significantly across different states and countries. For example, in the US as of 2025, gasoline prices range from $2.74 in Mississippi to $4.91 in California.
Fuel prices can change daily, but there are also seasonal trends. For example, prices tend to be lower during the cooler months when consumer demand is lower.
Organisations like AAA in the US and the UK government publish weekly fuel price updates, so you can stay informed about the latest prices and any sudden changes.
