Why are higher oil prices bad for the USA?

Oil is fungible: if the price goes up somewhere, producers will arbitrage selling there (absent restrictions on exports, which are claimed to have their own problems). It would be very hard to subsidize on short notice, hard to put in place via windfall taxes against oil lobbyists, hard to reverse once put in place and costly to administer technically and in practice, especially considering US federalism. Last, quite bizarre in a nominally free market economy. Sure, some oil producing countries subsidize gas heavily. But on balance they are not especially well run countries. So... higher prices, which pisses off drivers of big SUVs and trucks (MAGA's demographic).

What's going on with shipping YouTube 3:45 in and talks about precisely the source of pricing pressure. Dude has been killing it covering Hormuz for the last 4 weeks, probably 10x his channel subscribers since the war started (or at least since the Houthis started sniping). Lots of solid coverage about the shipping impact, knows his subject.

What he says: the US competes on world commodity markets for a whole bunch of stuff that has become a lot expensive: oil, fertilizer, helium.

Some oil still gets imported, depending on the region: What Drives California’s Gasoline Prices?

Imported crude and refined oil can come from domestic sources, but the majority comes from Asia, Africa, South America, and the Middle East. Overseas supply can take three weeks to arrive at California marine terminals, isolating California oil refineries and fuel distribution centers by time and distance. As a result, price spikes triggered by unplanned refinery outages or international supply shocks may last longer for Californians because resupply time is longer.

Imported gasoline and blending components accounted for 19 percent of supply in 2025. Supplies of gasoline and diesel fuel from outside the state are routinely needed to balance supply with demand.

One more item comes to mind: Canada's Pierre Trudeau had a plan to transfer wealth out of Alberta's oil by selling oil more cheaply domestically, the New Energy Program.

Created under the Liberal government of Prime Minister Pierre Trudeau on October 28, 1980, following the two oil crises of the 1970s, the NEP had three main objectives: increase ownership of the oil industry by Canadians; price energy fairly for Canadian consumers; and provide Canadian energy self-sufficiency. The NEP was also designed to promote lower prices through price controls; promote exploration for oil in Canada; promote alternative energy sources; and increase federal government revenues from oil sales through a variety of taxes and revenue-sharing with the oil-producing Western Canadian provinces.

40+ years later, Albertans still hate the Fed Liberals about it. While it's not an exact fit, the idea of "making oil cheaper for all Americans" still somewhat implies transferring wealth out of the oil patches (typically Republican states) to the rest of the country.

p.s. Just to be clear: Yes, oil prices are a problem even for the USA. Still, the current oil prices, and strait out supply situation, is significantly worse for many other countries.

moving from the theoretical to proof-in-the-pudding

(this is from US government's own reporting, showing changes from February 2026 to March 2026)

US consumer inflation hot in March amid record surge in gasoline prices | Reuters

The Consumer Price Index jumped 0.9% last month, the Labor Department's Bureau of Labor Statistics said, the largest increase since June 2022, ⁠when prices soared in response to the Russia-Ukraine war. Consumer prices rose 0.3% in February. Last month's increase was in line with economists' expectations.

A 21.2% jump in gasoline prices, the largest since the government started consistently tracking the series in 1967, accounted for nearly three quarters of the monthly ​increase in the CPI. Other motor fuels, which include diesel, also soared by a record 30.8%.

It affects how much everything costs.

Unfortunately, modern society runs on oil.

• Unless you have an electric car, driving burns gasoline or diesel. Americans drive an inordinately large amount; many of our urban areas date to the 1950s-60s, so they tend not to be conducive to walking or bicycling.
• If you want to move products around the continental U.S., you largely have four options: trains (which burn diesel), airplanes (which burn large amounts of aviation fuel), river barges (which burn petroleum, albeit relatively efficiently), and tractor-trailers (which burn diesel.)
• Over the past 40-ish years we have exported most of our consumer goods production to take advantage of cheap labor in Asia. To get to the U.S.A., these goods have to be shipped via freighters (which burn petroleum.)
• There are many industrial processes (especially plastics production) which consume petroleum distillates as a raw material.
• Most farmers (except for a small number of extremists such as the Amish) use tractors. These burn diesel.

As a couple other people have pointed out, oil price fluctuations have an outsized impact on the poor. Relatively small changes in the prices of basic necessities such as food and electricity make the difference between comfortable poverty and living hand-to-mouth. Further exacerbating the problem, our offshoring of consumer goods manufacturing especially effected lower-end products such as cheap clothing (which, by the way, is usually at least partially made of polyester plastic.)

Oil has many types. The US produces a specific type, and needs to import other types.

See:

There are hundreds of varieties of crude oil around the world. Different types of oil require different refining processes to make the fuels we need in the quantities we need. Many American refineries need heavier crudes than what is largely produced in the United States.

• Crude oils have different viscosities or “gravities.” “Heavy” crude oil is more viscous, while “light” crude oil is thinner.
• Crude oils also have different sulfur content. Low-sulfur crude is called “sweet” and high-sulfur crude is called “sour.”
• Refineries run on a mix of crude oils in order to run efficiently and maximize outputs. Nearly 70% of U.S. refining capacity runs most efficiently with heavier crude. That is why 90% of crude oil imports into the United States are heavier than U.S.-produced shale crude.

The different types of oil of course have different prices. If the heavier crude oils rise in price, the US, as an importer, suffers accordingly.

Because the US imports a large amount of oil, in 2025, an average of 7.9 million barrels per day were imported. While the US is a major oil producer, a lot is exported to other markets.

This is likely due to the type and quality of oil produced domestically versus internationally.

Is the US a bigger oil importer or exporter?

In 2025, the US exported more crude oil and petroleum products than it imported.

Petroleum and petroleum product exports totaled about 10.7 million barrels per day, while imports were about 7.9 million barrels a day. That’s a -2.8 million barrel a day difference.

Crude oil is a fossil fuel that can be refined into petroleum products such as jet fuel and gasoline. The US used to consistently import more petroleum and crude oil than it exported. But exports exceeded imports starting in October 2019. It’s been a net exporter in all but seven months since then.

This matters because it directly impacts the price of gas.

Graphic: Track U.S. and state gas prices National gas prices hit an average of $4 per gallon in March, the highest since 2022.

Gas prices in the United States, up more than 30% since the U.S. and Israel launched the war, have soared as the global oil supply constricts.

Now at a national average of more than $4 per gallon, according to data from motor club AAA, this price increase is straining already-stretched budgets in households across the country.

Some major US airlines may ‘not survive’ unless oil prices come down soon, experts warn

Some airlines could suffer major losses amid rising oil prices, according to industry leaders and experts.

The ongoing war with Iran has driven up oil prices worldwide, which means airlines are paying more than expected for fuel. As prices continue to rise, United Airlines CEO Scott Kirby warned some airlines might “not survive,” according to The Los Angeles Times.

The crude oil that the USA extracts from its own subterranean reservoirs is light grade crude oil. US oil refineries can only process heavier grade crude oils. Consequently, US refineries cannot process US domestic crude oil, only imported heavy crude oil.

The US sells its lighter crude abroad and imports heavier crude from abroad. In doing so it buys oil at the market rate. The increase in cost is passed on to domestic consumers of the oil, which then raises prices on all manner of goods and services which rely on such oil. This increases inflation and ordinary Americans experience a higher cost of living.

The sale of lighter crude oil abroad benefits the stock holders of the companies extracting and selling the oil. No benefit is passed on to ordinary Americans.

The United States produces lighter crude oil, imports heavier crude oil

Why the U.S Can’t Use the Oil it Produces