$71.50/bbl per barrel. That's where West Texas Intermediate crude traded Thursday—down +0.63% from recent highs as traders priced in the possibility that Iran and Oman might finally agree on a safe shipping corridor through the Strait of Hormuz. Iran says its agreement with Oman on Hormuz arrangements is at a "final stage," according to live shipping trackers, though the strait remains effectively closed to commercial shipping, with convoys moving only under naval escort.
But crude's retreat hasn't translated to relief at the pump. Motorists are currently paying around $4.06, down from the 2026 high of $4.56 but still 36% above what gas cost on Feb. 27 before the U.S. and Israel attacked Iran, AAA data shows. The disconnect is stark: retail gasoline prices are just 10% below this year's peak in May, even though West Texas Intermediate is down 26% from its 2026 high. The reason? The world is running out of refineries faster than it's running out of oil.
Can Refiners Keep Up With Demand?
High fuel prices are likely to stick around even if oil prices drop in the coming months as the wars in Russia and Middle East leave global refining capacity critically short, ExxonMobil Holdings Corp. and Chevron Corp. warned, Bloomberg reported last week. ExxonMobil Chief Financial Officer Neil Hansen said in an interview that "the constraint pain point in the energy system is refining."
The tightness in refining explains why fuel remains expensive even as crude oil prices have dropped significantly from this year's highs, ExxonMobil CEO Darren Woods told CNBC. Today, the constraints on refining have created a "disconnect between crude prices and pump prices," and gas prices are now being set by the demand for refining—not crude oil, he said. A record crack spread of approximately $70 per barrel in mid-2026 indicates that refined fuel is extraordinarily scarce relative to the crude used to produce it.
The math is brutal. Refineries in the United States operated at roughly 97 percent of their operable capacity this month, the U.S. Energy Information Administration reported, while Gulf Coast refineries are running at 98% capacity, and East Coast refineries are at 100% capacity.
The 2026 global fuel crunch is the product of four simultaneously active supply constraints: Middle East conflict disrupting Gulf product exports, Russia's extended diesel export ban through 2027, structural Western refinery capacity closures, and China's restrictive fuel export quota policy. U.S. refineries operating at their highest output since pre-pandemic levels remain mathematically insufficient to offset the combined shortfall.
The Financial Times noted that lost capacity in Russia and the Gulf is a boon to U.S. refiners but a political problem for Donald Trump, who has publicly criticized Big Oil for not bringing down costs fast enough.
What's Happening in the Permian?
One bright spot: natural gas. Waha natural gas prices turned positive after averaging below zero for much of 2026, helped by new pipeline capacity easing takeaway bottlenecks. The regional price of natural gas produced in the Permian, the top U.S. oil basin, was negative for most of the first half of the year.
The natural gas spot price at the Waha hub, the regional pricing benchmark reflecting Midland-area gas production and pipeline capacity constraints, averaged -$2.19 per million British thermal units (MMBtu) in the first half of 2026. The Waha price hit a record low of -$7.95 at the end of April, over $10 per MMBtu lower than the national benchmark at Henry Hub.
However, the Waha hub price turned positive in June and has held above zero for more than a month, thanks to the start-up of the expansion of the Gulf Coast Express Pipeline (GCX) and Energy Transfer's new Hugh Brinson Pipeline, according to Natural Gas Intel. Developers plan to bring approximately 44.9 billion cubic feet per day (Bcf/d) of new pipeline capacity online in the United States in 2026 and 2027. More than 66% (29.7 Bcf/d) of the capacity additions originate in Texas.
