Oil prices feed into inflation mainly through gasoline: crude oil made up 52% of the US pump price in May 2026, and gasoline is about 2.9% of the Consumer Price Index (CPI) [4][11]. In 2026, Brent crude rose from $72.48 a barrel on February 27 to a peak close of $118.35 on March 31, after the war with Iran shut most tanker traffic through the Strait of Hormuz, and it closed at $104.72 on October 9 [1][7]. As of August 2026, gasoline prices were up 27.4% from a year earlier, lifting headline CPI to 3.4%, while core inflation, which excludes food and energy, was 2.4% [3].
How does a crude oil price become a gasoline price?
A barrel holds 42 gallons. In 2023, US refineries produced about 19.6 gallons of gasoline, 12.5 gallons of diesel and heating oil and 4.4 gallons of jet fuel from each barrel [6]. Simple arithmetic follows: a $1 change in the price of a barrel is worth about 2.4 cents per gallon (100 cents divided by 42), so a $30 jump in crude adds roughly 70 cents a gallon before refiners and retailers adjust their margins.
The Energy Information Administration (EIA) splits the pump price into four parts. Crude is the largest; taxes are fixed in cents, so their share falls when prices rise [4][5].
| Component of regular gasoline | 2025 average ($3.10/gal) | May 2026 ($4.48/gal) |
|---|---|---|
| Crude oil | 51.4% | 52% |
| Refining costs and profits | 14.3% | 22% |
| Distribution and marketing | 17.8% | 15% |
| Federal and state taxes | 16.6% | 12% |
Source: EIA, Gasoline explained and Gasoline and Diesel Fuel Update [4][5].
Taxes explain the shrinking share. The federal tax is 18.4 cents a gallon, and state taxes and fees averaged 33.55 cents as of January 2026 [5]. The refining share also widened in 2026. That share reflects the crack spread, the gap between crude and fuel prices, which is why refiners such as Valero Energy (VLO) are watched closely when fuel prices jump. Diesel was hit harder than gasoline. The EIA says retail diesel averaged $6.29 a gallon in September 2026, driven by higher crude prices and rising crack spreads [10].
What happened to oil prices in 2026?
The International Energy Agency (IEA) reports that the United States and Israel launched air strikes on Iran on February 28, 2026, which led to attacks on regional oil facilities and a halt in tanker traffic through the Strait of Hormuz. Flows through the strait fell from about 20 million barrels a day before the war to "a trickle," and Gulf producers cut output by at least 10 million barrels a day [7]. The World Bank calculated that Brent rose about 65% in March, its largest monthly rise on record [8].
Prices did not move in a straight line. DataPorium data show Brent back near $72 in early July 2026, then above $100 again in September [1]. On September 14, 2026, Al Jazeera reported Brent at $107.82 after an attack on a ship in the strait, with daily transits in single digits against more than 100 a day before the war [9].
| Date | Brent ($/barrel) | WTI ($/barrel) | Regular gasoline ($/gal, week of) |
|---|---|---|---|
| October 2025 | 65.22 (Oct. 9) | 61.51 (Oct. 9) | 3.124 (Oct. 6) |
| Before the war | 72.48 (Feb. 27) | 67.02 (Feb. 27) | 2.937 (Feb. 23) |
| Spring peak | 118.35 (Mar. 31) | 112.95 (Apr. 7) | 4.500 (May 11) |
| Early summer low | 71.80 (Jul. 2) | 68.69 (Jul. 2) | 3.777 (Jul. 6) |
| Latest | 104.72 (Oct. 9, 2026) | 91.85 (Oct. 9, 2026) | 4.354 (Oct. 5, 2026) |
Source: DataPorium Commodities (front-month futures closes) and DataPorium Energy (weekly US average, taxes included) [1][2].
Brent is the international benchmark and West Texas Intermediate (WTI) the US one. Brent's premium over WTI was about $13 on October 9, 2026, against about $4 a year earlier [1]. In its October 6 outlook the EIA forecast Brent at $105 in the fourth quarter of 2026 and US regular gasoline at an average of $3.91 for 2026 [10].
How much do gasoline prices move the CPI?
The direct effect is the price change times the weight. Gasoline was 2.9% of the CPI as of December 2025, and all energy 6.4% [11]. A useful rule of thumb follows: a 10% rise in gasoline prices adds about 0.3 percentage points to headline inflation on its own.
The 2026 numbers fit that rule. With energy up 16.3% over the year to August 2026, energy alone contributed roughly 1 point (6.4% times 16.3%), about the gap between headline CPI at 3.4% and core at 2.4% [3][11]. The monthly effect can be larger. In March 2026, gasoline rose 21.2% after seasonal adjustment, and the all-items index rose 0.9%, its largest monthly increase between February and August 2026 [3][12].
What are second-round effects?
Second-round effects are price increases outside energy that follow because fuel is a cost for other businesses. Transport shows them first:
- Airline fares rose 23.4% in the year to August 2026, as jet fuel costs climbed; carriers such as Delta Air Lines (DAL) buy jet fuel refined from the same crude [3][12].
- Transportation as a whole rose 6.2%, while transportation services rose 2.4% [3].
- Diesel, the fuel of trucks and farm equipment, cost $6.199 a gallon in the week of October 5, 2026, 67% more than a year earlier, which raises freight costs that can reach store shelves with a lag [2].
Research suggests these effects have become small. A Federal Reserve Board paper by Cristina Conflitti and Matteo Luciani finds that oil passes into core inflation only through its effect on the whole economy, and that the effect is small but long lasting. It estimates that the 2014-16 fall in oil from about $100 to $30 a barrel cut core inflation by just a couple of tenths of a percentage point, and notes that pass-through to core has declined since the mid-1980s [13].
Why did core inflation stay low in 2026?
Core prices rose 2.4% in the year to August 2026, down from 3.1% a year earlier, even as energy rose 16.3% [3]. Three categories with large weights pulled the other way:
- Shelter, 35.6% of the CPI, slowed to 3.0% from 3.6% a year earlier [3][11].
- Goods excluding food and energy rose only 0.7%, with used cars and trucks down 2.3% [3].
- Motor vehicle insurance fell 5.1% after large increases in earlier years [3].
Energy producers such as Exxon Mobil (XOM) earn more when crude rises, but households pay more for fuel and have less to spend elsewhere, which can cool demand for other goods. The Federal Reserve still raised its target range by 0.25 points to 3.75%-4.00% at its September 15-16, 2026 meeting [19].
How does 2026 compare with past oil shocks?
Each major oil shock lifted headline inflation; what differed was how far it spread to core prices.
| Episode | Oil price | Headline CPI | Core CPI | Gasoline CPI |
|---|---|---|---|---|
| 1973-74 embargo | Doubled, then quadrupled | 11.1% (1974 average) | n/a | n/a |
| 2008 spike | WTI $133.88 (June 2008 average) | 5.6% (July 2008) | 2.5% | 37.9% |
| 2022, war in Ukraine | WTI $114.84 (June 2022 average) | 9.1% (June 2022) | 5.9% | 59.9% |
| 2026, Strait of Hormuz | WTI $102.13 (May 2026 average) | 3.4% (August 2026) | 2.4% | 27.4% |
Source: State Department Office of the Historian [17]; DataPorium Economic Indicators [18]; EIA WTI spot prices [16]; BLS CPI releases, 12-month changes [14][15][12].
The 1970s embargo by Arab members of OPEC was followed by double-digit inflation for the full year [17][18]. In 2008, headline CPI more than doubled core, as in 2026 [14]. In 2022, the oil shock arrived while core inflation was already high, at 5.9% in June; airline fares were up 34.1% that June, and US regular gasoline topped $5 a gallon, at $5.006 in the week of June 13, 2022 [15][2]. In 2026 the shock so far looks more like 2008 than 2022: large in energy, limited in core.
Oil reaches the CPI mostly through gasoline, about 2.9% of the basket; in 2026 that was enough to add roughly a point to headline inflation while core stayed at 2.4%.
The newest monthly CPI figures are on DataPorium's inflation page [3].
Key takeaways
- Crude oil was 52% of the US gasoline price in May 2026; each $1 per barrel is about 2.4 cents a gallon [4][6].
- Brent rose from $72.48 on February 27, 2026 to $118.35 on March 31 and was $104.72 on October 9, 2026 [1].
- Gasoline is 2.9% of the CPI, so a 10% gasoline rise adds about 0.3 points to headline inflation [11].
- As of August 2026, gasoline was up 27.4% and airline fares 23.4%, but core CPI rose only 2.4% [3].
- In 2022 core CPI reached 5.9% during the oil shock; in 2008 it stayed at 2.5% [14][15].
Frequently asked questions
How do oil prices affect inflation?
Mostly through fuel prices: crude is about half of the gasoline price, and gasoline is 2.9% of the CPI [4][11]. Higher fuel costs can also raise airfares and freight costs; airline fares were up 23.4% in the year to August 2026 [3].
How much does a $10 rise in oil add to gas prices?
About 24 cents a gallon, because a barrel holds 42 gallons [6]. Refining and retail margins can add to or subtract from that in the short run.
Why are oil prices so high in 2026?
Tanker traffic through the Strait of Hormuz, which carried about 20 million barrels a day before the war that began with strikes on Iran on February 28, 2026, was largely shut [7]. Brent closed at $104.72 on October 9, 2026 [1].
Does core inflation include gas prices?
No. Core CPI excludes food and energy, so gasoline is left out; core rose 2.4% in the year to August 2026, against 3.4% for all items [3].
Sources & References
- [1] DataPorium Commodities (WTI and Brent crude oil futures, daily)
- [2] DataPorium Energy (weekly US retail gasoline and diesel prices)
- [3] DataPorium Inflation (consumer prices by category, August 2026)
- [4] U.S. Energy Information Administration, Gasoline and Diesel Fuel Update (accessed October 13, 2026)
- [5] U.S. Energy Information Administration, Gasoline explained: Factors affecting gasoline prices (accessed October 13, 2026)
- [6] U.S. Energy Information Administration, Oil and petroleum products explained: Refining crude oil (accessed October 13, 2026)
- [7] International Energy Agency, Oil Market Report - March 2026 (March 12, 2026)
- [8] World Bank Data Blog, Strait of Hormuz disruption sends oil prices surging (May 7, 2026)
- [9] Al Jazeera, US says it's clearing Hormuz traffic: Why are oil futures beyond $100? (September 14, 2026)
- [10] U.S. Energy Information Administration, Short-Term Energy Outlook (October 6, 2026)
- [11] U.S. Bureau of Labor Statistics, Relative importance of components in the Consumer Price Indexes, December 2025 (accessed October 13, 2026)
- [12] U.S. Bureau of Labor Statistics, Consumer Price Index - August 2026 (September 11, 2026)
- [13] Federal Reserve Board, Conflitti and Luciani, Oil price pass-through into core inflation, FEDS 2017-085 (August 2, 2017)
- [14] U.S. Bureau of Labor Statistics, Consumer Price Index - July 2008 (August 14, 2008)
- [15] U.S. Bureau of Labor Statistics, Consumer Price Index - June 2022 (July 13, 2022)
- [16] U.S. Energy Information Administration, Cushing, OK WTI Spot Price FOB, monthly (accessed October 13, 2026)
- [17] U.S. Department of State, Office of the Historian, Oil Embargo, 1973-1974 (accessed October 13, 2026)
- [18] DataPorium Economic Indicators (annual US consumer price inflation)
- [19] DataPorium Interest Rates (Federal Reserve decisions, 2026)