The U.S. Energy Information Administration (EIA) has sharply raised its forecasts for oil, gasoline, and diesel prices, warning that high energy costs will persist through 2026 and 2027 due to unprecedented disruptions in Middle East oil supply following the closure of the Strait of Hormuz.
EIA Raises Price Forecasts
- The agency now expects gasoline prices to peak at $4.30 per gallon this month.
- Forecasts for 2026 and 2027 have been significantly increased, with prices remaining elevated.
- Fuel costs are projected to "continue to rise" until the strait reopens and oil production normalizes.
Historic Production Shut-Ins
- The conflict has caused Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, and Bahrain to collectively shut in crude oil production.
- Production cuts reached an estimated 7.5 million barrels per day (bpd) in March.
- This disruption is worsening, rising to approximately 9.1 million bpd in the current month.
Prolonged Recovery Timeline
- The EIA's outlook assumes the war does not extend past April and that strait traffic "gradually resumes."
- However, Middle East oil production is not expected to return to pre-conflict levels until late 2026.
- Full restoration of oil flows will take months, with the process of reopening the strait being unprecedented.
Official Caution
- Tristan Abbey, EIA administrator, stated: "Just as we had never before seen the strait close, we’ve never seen it reopen. What exactly that looks like remains to be seen. Full restoration of flows will take months."
- The agency emphasizes that specific details of the reopening remain uncertain.