I drove by the same gas station twice today. This morning, it read: Regular 87: $4.07 per gallon. Expensive, but nothing abnormal.

Then, this afternoon I went to pick up my wife and passed that same gas station. Now the sign read Regular 87: $4.39 per gallon.

This is something I’ve never seen before. Prices spike like this in a week or two…but in a day, holy cow. It was probably a “catch-up” adjustment. But it reflects the massive reduction in global refining capacity.

War… What’s It Good For?

The wars in Iran and Russia knocked out about 7% of global refining capacity. That’s a reduction of roughly 7 million barrels per day of gasoline and diesel fuel. And because, like oil, you can ship refined fuels anywhere, prices are soaring in the U.S. 

The national average is around $4.35 per gallon, so that’s probably the replacement cost for the station’s fuel.

According to GasBuddy.com, this isn’t the highest price we’ve seen this year. That was set back in May:

This is a damning chart. Gasoline prices have gone up over 40% since this time last year. And that hurts. But it isn’t just gasoline. Diesel prices are another issue I’ll get to in a minute. And giant retailer Costco just limited motor oil sales.

The Fuel Problem

We use about 400 gallons of gasoline per person, per year. That’s the average gasoline consumption for every man, woman, and child in the U.S. And when the oil price jumps $1.30 per gallon in a year…it adds $500 per person to the household bill. 

For a family of four, that’s an extra $2,000 per year just in fuel costs. And that’s not the only extra cost. Oil changes are up 40%, depending on where you live. 

Costco’s Kirkland 10-quart synthetic oil package jumped from $35.99 in December 2025 to $57.99 today. That’s a 61% increase in a standard oil change. 

Another area that will hit U.S. consumers this winter is heating oil. It just broke all-time highs:

But that’s just what the consumers feel directly. Another, more subtle cost increase comes from diesel. It continues to hit all-time highs.

A gross estimate of the impact of high diesel prices is that every $1.00/gallon increase adds about $120 million per day. That works out to be about $44 billion over a full year. And that’s just the extra cost of fuel for transportation companies like UPS, FedEx, J.B. Hunt, etc. 

And don’t for a second believe that they will eat those costs and save us the expense. We call that “inflation.” And I expect it to continue for at least another 12 to 18 months. You simply can’t restart wells and rebuild oil infrastructure in any less time. 

We also face a major oil shortage over the next year or more. The International Energy Agency (IEA) published a September Outlook that projected a 5.7 million-barrel-per-day supply cut. That’s almost a 10% drop in global supply. 

However, here in the U.S., the oil continues to flow at record levels. You can see in the chart below. That’s where investors can hedge against higher gasoline and diesel prices. 

We could easily see a record high in crude oil prices before the end of the year. And we’re already seeing all-time highs for refined fuel prices.

Wrap Up

We can use this to our advantage in two ways.

First, buy domestic refiners like Valero (NYSE: VLO) or Phillips 66 (NYSE: PSX). An easy way to play refining is to buy the VanEck Oil Refiners ETF (NYSE: CRAK). 

A second way to play this whole process is to buy integrated super-majors like ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX). These are the largest U.S. oil producers. They also own their own refiners. The final way to play this trend is the State Street SPDR Oil & Gas Exploration and Production ETF (NYSE: XOP). 

These sectors are already moving up quickly. The best way to hedge our costs at home is to own the companies that will make a fortune.