Strait Talk: Navigating Fuel Price Volatility

Regular gas cost an average of $2.81 per gallon in January, per the U.S. Department of Transportation’s Bureau of Transportation Statistics (BTS). Diesel was $3.52.

Then, in early March, shipping traffic in the Strait of Hormuz – which connects the Persian Gulf and the Gulf of Oman – began to experience severe restrictions in response to U.S. and Israeli military strikes on Iran.

By the end of May, gas had reached $4.48 per gallon, a 42% increase over a 12-month period. Diesel had spiked to $5.60, a 60% jump since May 2025, the BTS reported.

Continued volatility near the Strait of Hormuz as of press time has utility fleets closely monitoring the situation as they assess their fueling future. While there’s no way to predict when or how this chapter will end, here’s what we know now about the strait’s operational status, the war’s financial impact on American fleets and how fleet executives are responding.

Short-Term Outlook
In its July 2026 Short-Term Energy Outlook, the U.S. Energy Information Administration (EIA) raised its expectations for global oil production, stating, “We now expect most crude oil production to return to near pre-conflict averages by the end of this year and for the majority of shut-in crude oil production to be back online in the first quarter of 2027.”

Another projection from the July outlook: Wholesale prices will ease from their midyear peaks as global oil production and trade flows recover. Gas, diesel and jet fuel prices are expected to remain elevated, but the EIA has revised its estimates for the rest of this year and 2027, lowering them from its June projections.

There’s one glaring caveat here: The July outlook was published after the U.S. and Iran signed a memorandum of understanding in June to end the war and reopen the Strait of Hormuz. That MOU is no longer in effect as of early July. Updates are soon expected from the EIA in its August 2026 Short-Term Energy Outlook.

Before the war started, roughly 100 commercial ships navigated through the strait each day, according to CNN reporting (see www.cnn.com/world/strait-of-hormuz-tracker-vis). The daily average between March and mid-June? Thirteen ships. Traffic began to build once the MOU was signed, but more strikes in the area caused numbers to drop again. At press time, fewer than 20 ships were traversing the strait each day.

Utility Fleet Response
Not surprisingly, the mercurial nature of the Iran war is posing challenges to utility fleet professionals as they strive to manage finite budgets, address staff needs and keep fleet assets rolling.

“The most direct impact is the cost of commercial fuel purchases,” said Mike Donahue, fleet manager at Omaha Public Power District. “OPPD pays the same rate as everyone else does when we buy fuel at commercial stations. Therefore, our cost for that fuel has gone significantly higher in recent months.”

However, he explained, “Recent tensions have not impacted our fleet planning process. Although we are maintaining awareness of the situation and potential growth in the situation, we are planning normal replacements and operations.”

As director of operations support and business continuity for Nebraska Public Power District, Matt Gilliland’s experience has been much the same.

“Fuel has become not only more expensive, but – believe it or not – even more volatile,” he said. “More specifically, the prices are rising and falling (mostly rising) almost every day. As the tensions ebb and flow between calm and chaos, fuel prices change, too.”

Hedging Can Help
Fuel hedging, or contracting with a fuel vendor to lock in future pricing, is a common fleet approach to price volatility mitigation that aids in budgeting and forecasting tasks.

Nebraska Public Power already hedges some of its fuel purchases each year. When the war began, Gilliland shared, “We escalated our purchase timing. We moved the effort up on the calendar, knowing the fuel impacts were likely coming. This allowed us to save money and stabilize costs.”

Similarly, OPPD purchases bulk fuel when prices are low, Donahue said, typically in November or December. “Our historical performance has proven very beneficial over our history of using this strategy. OPPD has only experienced one year over 20-plus years of contracting where our contracted price did not save us significantly versus buying at daily rates.”

Because a utility’s on-site fuel typically costs less than purchasing fuel at a commercial station, Donahue encourages OPPD drivers to take advantage of their supply. “We communicate to our internal customers to fill up their vehicles and equipment at one of our seven internal sites throughout our service territory as much as possible, and to redirect to those sites even if the delays to get there cost them a few minutes.”

New Norm
Gilliland views the Iran war as one issue among many currently throwing a wrench into utility fleet operations. “The war in Ukraine, data center demands, EPA regulations, labor shortages and so on have really created strain and disruption in our industry.”

He also noted the downstream effect that the rising costs of metals, adhesives, rubber and other industrial inputs are having on the cost of fleet essentials, neatly capturing the widespread experience of the modern fleet professional: “Disruption is the new norm; the only difference now is what widget and at what speed.”

About the Author: Shelley Mika is the owner of Mika Ink, an Omaha, Nebraska-based branding and marketing communications agency. She has been writing about the fleet industry since 2006.