The Iran war, diesel fuel, and a tired  infrastructure story

GasBuddy analyst Patrick De Haan projected the national gas average would push past $3.00 per gallon within days, with some individual stations potentially seeing increases of up to 85 cents. Experts expect the average to settle between $3.10 and $3.15 over the next couple of weeks. If the conflict extends and the Strait remains restricted, analysts at Goldman Sachs and Rapidan Energy Group have warned prices could blow past $100 per barrel.

For trucking, the diesel signal is even more concerning. Gasoil futures spiked specifically on news of the Ras Tanura shutdown because that facility is a key supplier of diesel and transport fuels to global markets. Every dollar increase in crude translates to roughly 2.5 cents per gallon at the pump. Do the math on a $10 to $20 per barrel surge sustained over weeks, and you’re looking at 25 to 50 cents added to every gallon of diesel. For a long-haul driver burning 120 gallons a day, that’s $30 to $60 in additional daily fuel cost. Multiply that across a fleet of 50 trucks and the numbers get real ugly, real fast.

This is not new. The pattern is almost mechanical at this point. The United States engages militarily in the Middle East, oil prices spike, and American consumers and businesses absorb the cost. It has happened in every decade since the 1970s.

The 1973 Arab oil embargo, triggered by U.S. support for Israel during the Yom Kippur War, quadrupled oil prices from roughly $3 to $12 per barrel within months. Gas lines stretched around the block. The 1979 Iranian Revolution and subsequent hostage crisis sent crude from $15 to nearly $40 a barrel. Saddam Hussein’s invasion of Kuwait in 1990 pushed prices from $21 to $46 per barrel in a matter of weeks. The 2003 Iraq invasion saw crude climb from around $30 to $55 within a year, and the broader instability that followed contributed to the historic run-up to $147 per barrel in July 2008.

In September 2019, drone and missile attacks on Saudi Arabia’s Abqaiq and Khurais facilities, attributed to Iran despite Houthi claims of responsibility, temporarily knocked out more than half the kingdom’s crude production. That attack produced the largest single-day spike in oil prices since the first Gulf War. Last June, when the U.S. and Israel conducted a more limited strike on Iranian nuclear sites in what was called Operation Midnight Hammer, oil prices rallied sharply before falling back when retaliation was muted. This time, the retaliation has been anything but muted.

The trucking industry feels the impact of every one of these events on its operating margins. Diesel represents the single largest operating cost for most carriers, typically 25% to 35% of total expenses. Seventy-six percent of Class 3 through Class 8 commercial vehicles in this country run on diesel. When diesel prices spike, margins evaporate overnight. Small carriers and owner-operators, who make up the overwhelming majority of the industry, are the most exposed. They can’t hedge fuel costs the way large publicly traded fleets do. They absorb it, pass it through surcharges that lag behind reality, or they go under.

I remember running loads in the mid-2000s when diesel went from under $2.50 to over $4.50 in what felt like the blink of an eye. Guys were parking trucks. Fuel surcharges hadn’t caught up. Brokers were still quoting rates as if nothing had changed. You’d fill up both saddle tanks and watch $600 disappear before you’d turned a wheel. That wasn’t just a business problem. It was an existential crisis for many small operators. We’re watching the conditions for a replay form right now.

Here’s what makes this situation so maddeningly avoidable. The United States is the world’s largest oil producer. Full stop. It’s not close.

U.S. crude oil production hit a record 13.6 million barrels per day in 2025, according to the EIA’s January 2026 Short-Term Energy Outlook. The Permian Basin alone produced roughly 6.6 million barrels per day, nearly half the national total and more than many entire OPEC nations produce individually. The Bakken adds another 1.3 million barrels per day. The Eagle Ford contributes 1.1 million. Offshore Gulf of America production runs around 1.8 to 1.9 million barrels per day. Combined with other plays across the Lower 48 and Alaska, America’s fields are pumping at volumes that would have been unthinkable 15 years ago.

The shale revolution was real, and it worked. Tight oil production from horizontally drilled wells grew from 0.8 million barrels per day in 2010 to 8.9 million barrels per day in 2024, accounting for 81% of all onshore Lower 48 production. The Permian’s Wolfcamp play alone produced 3.4 million barrels per day in 2024, equivalent to the production from all non-Permian tight oil plays combined. California, despite its regulatory posture, still produces roughly 300,000 barrels per day. Alaska continues to ramp up new projects.

President Trump’s energy dominance agenda is built on this foundation. The argument is straightforward: with the largest oil production capacity in the world between the Permian, the Bakken, Alaska, our offshore reserves and the sheer depth of geological formations still being developed, the United States should never be at the mercy of Middle Eastern conflicts for its energy supply. And in terms of raw production volume, that argument is correct.

Production is only one part of the equation. The real question is whether we can turn that crude oil into the diesel and gasoline that actually powers the economy. And the honest answer is: not enough of it, and not fast enough.

The EIA’s 2025 Refinery Capacity Report lists 132 operable refineries in the United States, with a total atmospheric distillation capacity of 18.4 million barrels per calendar day as of January 2025. That sounds like a lot, and it is, but the trajectory is going in the wrong direction.

In VA, what started as the Amoco Yorktown Refinery has been dismantled. Once the prime employer in the area, they now employ a handful of people who primarily cut grass and maintain facilities for the Plains North American parent. LyondellBasell closed its 264,000-barrel-per-day Houston refinery in March 2025. Phillips 66 ceased operations at its 139,000-barrel-per-day Los Angeles refinery later that year. That’s over 400,000 barrels per day of capacity, gone. The EIA projected U.S. refinery capacity would fall to 17.9 million barrels per day by the end of 2025, roughly a 3% decline from the start of the year. No major new refinery has been built in the United States since the 1970s. Every capacity addition in the last decade has been an expansion at an existing facility or the reactivation of a previously idled unit.

The three largest refiners, Marathon Petroleum at 2.96 million barrels per day across 13 refineries, Valero at 2.2 million across 13, and ExxonMobil at 1.96 million across four, all reported capacity increases of less than 1% in 2025. Marathon’s Galveston Bay facility is the nation’s largest at 665,000 barrels per stream day. Annual refinery utilization over the past decade has averaged about 89%. Running at 100% for sustained periods is physically impossible due to maintenance cycles, weather events, and mechanical limitations.

Here is the diesel-specific problem. Refining diesel is significantly more costly per gallon than gasoline. Crude oil accounts for about 45% of the embedded cost of a gallon of diesel, compared with 57% for gasoline. But refining itself accounts for 22% of diesel’s cost, compared with only 14% for gasoline. The complex refinery units required to produce diesel, catalytic cracking, hydrocracking, and coking capacity are more capital-intensive and harder to scale than those used for gasoline production. And distribution adds another cost premium: 19% of diesel’s price versus 13% for gasoline.

The numbers that matter: the U.S. transportation sector consumed approximately 3 million barrels per day of distillate fuel in 2022, roughly 125 million gallons daily. The trucking industry alone consumes over 35 billion gallons of diesel annually, with 28 billion of that going to the nation’s 3.25 million combination trucks. That is approximately 68% of total national diesel demand coming from commercial trucking. Two-thirds of all diesel consumption in this country goes to the vehicles that move the freight that stocks the shelves. When diesel supply gets tight, it’s not just trucking that gets more expensive. It’s everything.

Even if we had sufficient refining capacity, getting the crude from the wellhead to the refinery is an infrastructure challenge in itself. The Permian Basin’s explosive production growth has repeatedly outpaced pipeline takeaway capacity. Natural gas pipeline utilization in the Permian exceeded 90% in 2024, pushing regional Waha Hub spot prices below zero for 46% of trading days that year , including every single day from late July through early September. That’s not a typo. Producers in the most prolific basin in the country were paying people to take their natural gas because there wasn’t enough pipe to move it.

New infrastructure is being built, but not fast enough. The 2.5-billion-cubic-foot-per-day Matterhorn Express Pipeline began operations in late 2024, providing some relief. Enbridge expanded its Gray Oak crude pipeline by 120,000 barrels per day. Three additional Permian Basin gas pipeline projects with a combined capacity of 7.3 billion cubic feet per day are in various stages of development and expected to come online between 2026 and 2028. Five petroleum product pipelines were completed nationally in 2024, with nine more announced and eight under construction.

But permitting delays, environmental litigation, and the sheer capital cost of construction, which has risen significantly in recent years, continue to slow the buildout. The National Petroleum Council’s 2025 report, aptly titled “Bottleneck to Breakthrough,” laid it out plainly: even though the national energy supply is ample, pipeline-constrained regions experience persistent price spikes and elevated fuel costs. The report identified infrastructure bottlenecks as directly driving higher consumer energy prices and creating serious reliability concerns across the entire supply chain.

The oil is in West Texas. The refinery might be in Port Arthur or Galveston Bay. The diesel eventually needs to reach a truck stop in Ohio or a distribution center in Tennessee. Every mile of that journey requires functioning, adequate-capacity pipeline infrastructure, rail capacity, barge movements or tanker trucks. A bottleneck at any point in that chain means the driver sitting at the fuel island in Nashville pays more, which means the carrier charges more, which means the shipper pays more, which means the price on the shelf goes up. This is not abstract. This is the daily math of American commerce.

Meanwhile, the Trump administration’s January capture of Venezuelan President Nicolás Maduro has opened a second front in the energy dominance strategy, and it’s worth examining what it actually means for supply.

Venezuela holds the world’s largest proven oil reserves at roughly 300 billion barrels, 17% of the global total. It also holds 70% of Latin America’s natural gas reserves. On paper, it’s an energy superpower. In reality, production has collapsed. Under the Maduro and Chávez regimes, Venezuelan output fell from roughly 3.5 million barrels per day in the late 1990s to about 1 million barrels per day at the time of Maduro’s capture, less than 1% of global crude production. Decades of underinvestment, forced nationalization, the departure of ExxonMobil and ConocoPhillips in 2007, and resulting arbitration claims totaling more than $12 billion devastated the country’s infrastructure.

Trump was explicit about the opportunity hours after the capture: “We’re going to have our very large U.S. oil companies go in, spend billions of dollars, fix the badly broken infrastructure, and start making money for the country.” Chevron, the only U.S. major still operating in Venezuela, was exporting about 140,000 barrels per day in the fourth quarter of 2025. Before the capture, Venezuela’s oil shipments to China, its main buyer, averaged over 600,000 barrels per day, about 4% of China’s total oil imports. Severing that relationship was part of the strategic calculus.

But here’s the reality check. Rebuilding Venezuela’s oil infrastructure is a multi-year, multi-billion-dollar endeavor requiring political stability, a functioning legal framework, and sustained investment in an environment where companies have been burned catastrophically before. Venezuela’s heavy, sulfur-rich crude requires specialized refining capacity, exactly the kind of complex processing that Gulf Coast facilities were originally designed for. That’s a natural match for U.S. refiners, and Secretary of State Rubio specifically touted Gulf Coast refinery capabilities for processing Venezuelan crude. But it only matters if the crude can actually get here reliably and the political risk becomes manageable.

Energy analysts at Columbia’s Center on Global Energy Policy noted that in the short term, political turmoil in Venezuela could actually disrupt production further through strikes, instability, loss of imported diluent or continued U.S. oil blockade enforcement. The real significance is strategic: coupling Venezuelan reserves with domestic Permian production could, in theory, give the United States influence over a combined reserve base rivaling that of the entire Middle East. But theory and execution are separated by years of development and billions in capital expenditure. In the near term, Venezuela is a geopolitical chess piece, not a supply solution.

Diesel prices are going up. How much and for how long depends on whether the Strait of Hormuz reopens to commercial traffic, whether Iran continues targeting Gulf energy infrastructure, and whether the conflict escalates or de-escalates in the coming days and weeks.

In the most benign scenario, quick resolution, limited infrastructure damage, we’re probably looking at 10 to 30 cents per gallon at the pump for a few weeks. In the worst case, a sustained Strait closure or major damage to Saudi, Qatari or Emirati production and export facilities, we could see prices spike well beyond that. If crude reaches $100 per barrel, analysts at Capital Economics estimate it could add roughly 0.6 to 0.7 percentage points to global inflation. JPMorgan Chase CEO Jamie Dimon acknowledged the inflationary risk, noting it could become a major hit if the conflict drags on.

OPEC+ has already moved, announcing a production increase of 206,000 barrels per day for April, more than the expected 137,000 barrels per day. As Rystad Energy’s Jorge León noted, if flows through the Gulf are physically constrained, additional production capacity provides limited immediate relief. You can pump all the oil you want. If you can’t move it through a chokepoint that’s under fire, it doesn’t matter.

For carriers, the calculus is straightforward: higher fuel costs compress already-thin margins in a freight market that has been soft for much of the past two years. Owner-operators and small carriers are most vulnerable. Fuel surcharges help, but they lag behind real-time price spikes and rarely cover the full cost of a rapid increase. The last time diesel surged this sharply during the Russia-Ukraine crisis in 2022, the industry saw a wave of small carrier failures. We could see a repeat.

For shippers, this cost is passed through. For consumers, the reality is that every item on every shelf in every store in America got there on a truck that runs on diesel. When that diesel gets more expensive because of events in the Persian Gulf, every American pays the price at the register.

The fundamental disconnect in the energy dominance conversation is this: we talk about production as if it’s the whole story. It’s not. Production is where the story starts. The story ends at the fuel island, and everything between that point and the fuel island is infrastructure.

The United States produces 13.5 to 13.6 million barrels of crude per day. It has a refinery capacity of roughly 18 million barrels per day, but that number is shrinking as older facilities close and no new greenfield refineries are being built. The EIA projects U.S. production will actually dip slightly in 2026, in part because WTI prices have fallen below the $61 to $62 per barrel breakeven threshold that Permian operators reported to the Dallas Fed. Pipeline infrastructure in the country’s most productive basin routinely runs at or above 90% utilization. Permitting for new pipeline and refinery construction takes years of regulatory review and legal challenge. And the specialized refining capacity needed to turn crude into diesel requires the kind of heavy capital investment that refiners have been reluctant to make in an environment of uncertain long-term demand, declining crack spreads and industry consolidation.

If the Trump administration is serious about energy dominance, and I believe the intent is real, the conversation needs to shift from “drill baby drill” to “build baby build.” We need more refining capacity, or at a minimum, a halt to the erosion of existing capacity. We need a faster pipeline permitting process that doesn’t get strangled by decade-long environmental reviews. We need strategic diesel reserves that specifically protect the transportation sector. We need to recognize that 76% of Class 3 through Class 8 commercial vehicles in this country run on diesel, that two-thirds of all diesel consumption comes from commercial trucking, and that this is the lifeblood of the American supply chain. It is vulnerable to every conflict in the Middle East because we have failed to close the gap between what we produce and what we can process and move.

Venezuela’s reserves offer a long-term supplement, but they are years from meaningful production recovery. Domestic output from the Permian, the Bakken, the Eagle Ford and our offshore fields provides the raw material. But until we invest in the midstream and downstream infrastructure that turns barrels into gallons and moves those gallons to where they’re needed, we will continue to watch bombs fall in Tehran and diesel prices rise in Tulsa, in Nashville, in every truck stop from the Port of Los Angeles to the distribution yards outside Newark.

The trucks are ready to roll. The oil is in the ground. What’s missing is everything in between.

The post The Iran war, diesel fuel, and a tired  infrastructure story appeared first on FreightWaves.