Analyze how crude oil barrel shocks, refinery crack spreads, and supply choke points propagate directly to local pump prices and monthly household commute costs.
| Cost Component | Basis / Factor | Contribution ($/gal) | Share of Total |
|---|
When Middle East geopolitical escalation threatens maritime supply corridors like the Strait of Hormuz (which carries ~20% of global petroleum liquids), wholesale prices surge immediately (the "rocket"), while reductions take weeks to reach consumer pumps (the "feather").
A standard 42-gallon barrel of crude oil yields roughly 19 to 20 gallons of finished gasoline alongside diesel, jet fuel, and petrochemicals. The "3:2:1 crack spread" measures the refinery conversion margin above raw feedstock.
Transportation fuel represents an inelastic household expense. A sustained $25/bbl geopolitical shock adds approximately $0.60 to $0.70 per gallon, transferring roughly $350 to $650 per vehicle annually out of discretionary consumer spending.