Mark Zandi explains how the global oil market and the Iran war are driving up domestic gasoline prices for American consumers.

Mark Zandi, chief economist of Moody’s Analytics, notes that while the United States is the world's leading oil producer, domestic gasoline prices remain highly sensitive to global market shifts. Recent military strikes between the U.S. and Iran have caused oil prices to spike as the war threatens shipments through the Strait of Hormuz. Although the U.S. produces more oil than it imports, it remains a major consumer in a global market where oil flows to the highest bidders. The conflict has created a pinched supply, causing prices to rise even though the U.S. is relatively insulated from a total shortage. While crude oil prices react to headlines in seconds, gasoline prices often lag behind because they must move through refineries and supply chains. Currently, U.S. refineries are operating at nearly full capacity to meet high summer demand. Experts suggest that while the Iran war has caused significant hardship for motorists at the pump, the nation's large production capacity has prevented a full-scale crisis.

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