MW The U.S. produces the most oil in the world. So why are gasoline prices so high?
By Claudia Assis and Myra P. Saefong
At an average $4.26 a gallon, prices at the pump have hit their highest level in four years
Gasoline prices averaged $4.258 a gallon on April 29, 2026, according to GasBuddy.
The U.S. is the world's largest oil producer and the top global exporter of gasoline. Yet Americans are paying the highest prices for gasoline in nearly four years, leading to frustration at the pump and worries about higher inflation and a weaker economy.
The U.S.-Israeli war with Iran and the energy shocks it has produced are only part of the reason. Crude futures prices (CL00) (BRN00) were on the rise again on Wednesday as the stalemate over the Strait of Hormuz continued and a deal to fully open the strategic waterway remained elusive.
The cost of crude oil is the largest part of gasoline's retail price, clocking in at about half the price of a gallon of gas. Federal and state taxes, marketing and distribution costs, and refining costs and profits make up the rest of the cost. Seasonality, demand patterns, refining mismatches and refinery closures, along with the push and pull of economics, also factor into the price.
Gas prices in the U.S. averaged $4.26 a gallon on Wednesday, according to GasBuddy, more than one dollar above where they were before the Iran war started on Feb. 28, and the highest average price since July 2022.
The U.S. is more insulated from price shocks than most countries, but it is not immune, said Rebecca Babin, senior energy trader and managing director at CIBC Private Wealth. Refinery constraints, logistics and global pricing dynamics still drive what consumers pay at the pump, she said.
"The U.S. energy system has a buffer, but it doesn't operate in a vacuum. Global tightness and domestic bottlenecks still show up in gasoline prices," Babin said.
U.S. oil is 'not always the right kind in the right place'
The refining system operates with little spare capacity, which makes it run efficiently but also means that any outages, maintenance or demand spikes lead quickly to higher gasoline prices.
Refinery constraints also play a big part in the disconnect between plentiful U.S. supplies and rising gasoline prices.
"The U.S. produces a lot of oil, but not always the right kind in the right place," Babin said.
Much of the U.S. refining system is configured to run heavier crude like the type that comes from Canada, which exports the vast majority of its oil to the U.S. That means the U.S. still imports crude to optimize refinery runs, while exporting lighter crude and refined products.
Refiners in the U.S. have invested billions of dollars over the past decades to enable the processing of heavy, sour crudes into usable refined products like gasoline, diesel and jet fuel, said Denton Cinquegrana, chief oil analyst at OPIS. (OPIS is a unit of Dow Jones, the publisher of MarketWatch.)
The investment allowed them to take advantage of the light-heavy spread, as heavy crudes are typically cheaper because they are lower quality and require more processing.
The U.S. also has lost refineries and refining capacity also has been reduced due to aging infrastructure and stricter environmental standards. During the pandemic, weaker margins led several plants to close or to convert to biofuels.
There's also the switch to the less polluting summer gasoline formulation, which happens from March to April. Summer gas is refined in a way that reduces emissions and smog, but it is also costlier to make.
Meanwhile, the U.S. saw record crude exports last week, and as a result its inventories dropped further in the week that ended April 24. U.S. crude inventories will continue to be drawn down by strong exports and rising refinery runs ahead of summer driving season, said Matt Smith, an analyst with Kpler.
The demand side of the equation
The other side of the equation - demand - has been steady despite the higher prices. Over the four weeks to April 24, total motor gasoline product supplied, a proxy for demand, was up 1.2% from the same period a year ago, at an average of 9 million barrels per day, according to the Energy Information Administration.
Gas prices are likely to move higher as the peak summer travel season approaches. People are likely locked in to summer plans, said Jay Zagorsky, a professor at Boston University's Questrom School of Business.
If prices remain elevated through the fall, however, many will look at the situation and re-evaluate the type of car or truck they drive with an eye toward better fuel economy. They also might rethink plans for Thanksgiving and end-of-year holiday travel, he said.
-Claudia Assis -Myra P. Saefong
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(END) Dow Jones Newswires
April 29, 2026 16:33 ET (20:33 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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