Veteran commodities strategist Jeff Currie has warned that the odds of U.S. average gasoline prices reaching $5 per gallon before the November midterms are 'extremely high,' according to comments made to Bloomberg. Currie, former chief commodities strategist at Goldman Sachs and now founder and CEO of Real Macro, characterized the current energy shock as entering a dangerous new phase marked by shortages spreading upstream from refined products into crude supplies, compounded by currency debasement. Currie's analysis centers on the structural constraints facing the refining sector.
He notes that refineries cannot maximize gasoline production without constraining diesel supplies, with diesel already experiencing the tightest market conditions. When crude oil trades near $100 per barrel, refined products have commanded substantially higher values. Recent diesel crack spreads have reached approximately $110 per barrel, with 3-2-1 cracks at multi-decade extremes, with products valued near $160 per barrel when crude sits at $100.
The return of China to crude markets after cutting runs and exports adds additional demand pressure into an already strained system. Current price levels provide context for Currie's forecast. The national regular-gasoline average stands at approximately $4.29 per gallon, while diesel has set a new U.S. record above $6.05 per gallon.
California pump prices tell a more acute story, with statewide regular gasoline near $5.93 and diesel at $7.98, with some Bay Area and Central Valley stations reaching the pump maximum of $9.999 per gallon. Wholesale ultra-low-sulfur diesel on the U.S. Gulf Coast closed near $4.83 per gallon on September 9, which translates to approximately $203 per barrel before taxes, freight, and retail markup.
Retail diesel at $6.05 per gallon represents more than $250 per barrel equivalent. European diesel has similarly traded near $200 per barrel. Jet fuel presents comparable pressures; Gulf Coast kerosene-type jet fuel was approximately $4.34 per gallon on September 9, with national jet averages at fixed-base operators significantly higher.
The refining system operates with virtually no spare capacity. U.S. refinery utilization reached 97.8% for the week ending September 4, with the Midwest operating above 100% of operable capacity and the Gulf Coast at 98.3%. At these utilization levels, there remains almost no margin to absorb a hurricane, unplanned outage, delayed turnaround, or additional geopolitical shock.
Distillate production has failed to keep pace with the additional crude being processed. The Energy Information Administration forecasts distillate inventories will drop 100 million barrels below the five-year low in September and remain below that threshold through much of 2027, eliminating any buffer in the system. Geopolitical disruptions compound supply tightness.
The Strait of Hormuz has remained disrupted since the U.S.–Iran war began in late February 2026. A second critical chokepoint is now closing as Iran-backed Houthis have seized Mocha on Yemen's Red Sea coast and advanced toward Perim Island in the Bab el-Mandeb Strait. Transits through this strait have plunged significantly.
Saudi crude already unable to move freely through Hormuz now faces a second threat on the Red Sea route that carries substantial Gulf oil toward Asia and the Suez system. Approximately 12% of global oil trade normally moves through Bab el-Mandeb. Tanker market pricing reflects these risks.
Very Large Crude Carrier (VLCC) earnings on the Middle East–China benchmark have reached records near $800,000 per day. A reported U.S. Gulf–Asia VLCC fixture was quoted at $29.5 million lump sum, equivalent to approximately $15 per barrel in freight costs before war-risk premiums and delays.
Extended routing, ship-to-ship transfers, and vessel scarcity lock ships in service for weeks, transforming high tanker fees from a minor consideration into a structural tax on each barrel. California presents particular vulnerability. The state already maintains the nation's highest pump prices and minimal supply resilience.
It lost major refining capacity when Phillips 66 Wilmington and Valero Benicia closed. West Coast refining capacity has declined sharply over five years. California's requirement for unique CARB gasoline and CARB diesel specifications creates an isolated market increasingly dependent on imports precisely when Asian and Middle Eastern product exports face disruption.
The state's remaining plants operate near capacity against a diminished base, meaning even single outages, delayed cargoes, or additional tanker rate increases hit California first and hardest. The Energy Information Administration's latest Short-Term Energy Outlook raised rather than reduced its diesel forecast. The EIA now projects U.S. retail diesel averaging $5.07 per gallon in 2026 and $4.40 in 2027.
Gasoline averages in the EIA forecast are $3.84 in 2026 and $3.35 in 2027. Those 2027 projections assume Hormuz traffic normalizes and inventories rebuild, with distillate stocks expected to remain below the five-year low through much of 2027. The EIA notes diesel cracks remaining above $2 per gallon into late fall before easing only if Middle East distillate exports resume.
Other major financial institutions echo concerns about sustained product tightness. Goldman Sachs more than doubled its 2027 diesel-margin forecasts to approximately $63 per barrel in the United States and $49 in Europe. HSBC has raised oil-price and refining-margin assumptions and expects product tightness through 2027 even as crude balances improve.
Traders and refiners at recent Middle East conferences indicated that Gulf and Russian refinery damage cannot be rebuilt quickly. A Hormuz reopening could dump crude onto the market and widen cracks further if product capacity remains destroyed. Jet fuel analysts similarly see price pressures persisting into 2027 even if supply concerns ease.
Currie's $5 national gasoline call, while aggressive relative to EIA annual averages, remains grounded in current market dynamics. The national average has already reached $4.29, California has surpassed $5, and diesel already trades above $6. One additional supply disruption, single refinery outage, or few weeks of $800,000-per-day VLCC rates would close the remaining gap.
The fundamental issue is structural scarcity with no margin for error anywhere—not in the Strait of Hormuz, not in Bab el-Mandeb, not in the tanker market, and not at 97–98% utilization levels. That reality defines the backdrop for Currie's probability assessment through the midterm elections. Sources: Bloomberg, Energy Information Administration, TradeWinds, Goldman Sachs, HSBC, Ishka, Energy News Beat (energynewsbeat.co), published September 11, 2026.
Source: energynewsbeat.co