Regular gasoline averaged $4.354 a gallon in the Energy Information Administration’s Oct. 5 survey, down from $4.465 a week earlier but still far above where it stood before the Strait of Hormuz disruption began in late February. Diesel is worse: AAA’s national average set a record of $6.5276 a gallon on Sept. 22.
Washington has now pulled most of the levers it has. The Energy Department is still lending out crude from the Strategic Petroleum Reserve, the White House deferred the federal diesel tax by executive order on Oct. 5, and EPA is issuing rolling fuel waivers. This file explains each tool, what it can move, and what it cannot.
1. Why the price is where it is
Crude oil is priced globally, and roughly half of what drivers pay at the pump is the cost of crude. When tanker traffic through Hormuz was cut, the price of every barrel rose, including those produced in Texas. EIA’s October Short-Term Energy Outlook, released Oct. 6, forecasts Brent crude at $105 a barrel in the fourth quarter of 2026, easing to $84 on average in 2027.
Although we assume that oil flows from the Middle East will remain constrained through the fourth quarter of 2026 (4Q26), we estimate that regional shut-in production in September was the lowest since the onset of hostilities.
EXCERPT · EIA, Short-Term Energy Outlook, Oct. 6, 2026
Regional gaps are large. In the Oct. 5 survey, the West Coast averaged $5.727 and California $6.227, while the Gulf Coast was at $3.911. Those differences reflect refinery capacity and state taxes and fuel rules, not federal policy.
2. Lever 1: the Strategic Petroleum Reserve
The SPR stores federally owned crude in salt caverns at four sites on the Gulf Coast, with authorized capacity of 714 million barrels. It can release oil two ways. A sale requires a presidential finding under the Energy Policy and Conservation Act. An exchange, which the Energy Secretary can authorize, lends barrels to companies that must return them later with a premium.
This year’s response has used the exchange route. On March 13, DOE announced a 172-million-barrel exchange as the U.S. share of a 400-million-barrel coordinated release by International Energy Agency members. On Sept. 29, it issued a request for proposals for up to 40 million more barrels from the Big Hill and Bryan Mound sites, with bids due Oct. 6 and deliveries scheduled for November and December. DOE says earlier rounds awarded more than 133 million barrels across four completed exchanges and secured a 25 percent premium in returned barrels.
| Tool | Who acts | Status | Main limit |
|---|---|---|---|
| SPR exchange | Energy Secretary | 40M-barrel RFP; deliveries Nov.–Dec. | Adds supply to a global market; barrels must be returned |
| Diesel tax deferral | President / Treasury | EO 14435, Oct. 5 to Dec. 31 | Deferral, not repeal, unless Congress acts |
| Fuel waivers | EPA | Rolling 20-day waivers (Ariz., Calif., Texas, Alaska) | Short duration; local supply only |
| Federal gas tax holiday | Congress | Not enacted | 18.4 cents a gallon at most; pass-through uncertain |
The limit is arithmetic. A 40-million-barrel tranche delivered over two months is meaningful at the margin of a tight market, but it is borrowed supply. When the barrels come back, they come off the market.
3. Lever 2: the tax code
Executive Order 14435, “Emergency Tax Relief on Diesel Fuel,” signed Oct. 5, does two things. It temporarily allows untaxed, dyed off-road diesel to be used on highways, and it directs Treasury to defer the federal diesel excise tax incurred from Oct. 5 through Dec. 31, 2026, using its disaster-relief deferral authority under 26 U.S.C. 7508A. The White House puts the federal diesel tax at 24.4 cents a gallon.
Farmers and truckers are essential to the American way of life. Restricted global diesel supply has led to rising prices, and these key industries have been particularly hard hit.
EXCERPT · Executive Order 14435, Sec. 1
Two details deserve attention. First, a deferral is not a cut: unless the tax is later forgiven, which the order asks Treasury to explore and which would likely need Congress, it comes due. Second, the order does not touch the 18.4-cent federal gasoline tax. Suspending that requires legislation, and no federal gas tax holiday has passed.
A deferral is not a cut. Unless the tax is later forgiven, it comes due.
4. Lever 3: fuel waivers, and the limits
Under the Clean Air Act, EPA can waive fuel specifications for up to 20 days at a time during supply emergencies. On Sept. 29 it waived state boutique gasoline requirements in Arizona and California, and on Oct. 5 it issued a diesel waiver for Texas running through Oct. 24, alongside an Arctic diesel waiver for Alaska. Waivers let refiners and distributors move fuel that would otherwise be off-spec for a given market. They ease local bottlenecks; they do not change the price of crude.
No federal tool reopens a shipping lane. The SPR and waivers add supply at the margin, and tax relief shifts who bears the cost. EIA’s own forecast, which assumes constrained Middle East flows through year-end, is the more important number for drivers than any of the policies above.
There is also a monetary angle. Every month that gasoline lifts headline inflation is a month the Fed must decide whether to look through it. The FOMC raised rates on Sept. 16; its next decision is Oct. 28.
5. What to watch
- Oct. 14: September CPI, the first official read on how much of the gasoline spike reached consumer prices.
- Oct. 24: scheduled expiry of EPA’s Texas diesel waiver, unless extended.
- November–December: deliveries under DOE’s 40-million-barrel exchange.
- Dec. 31: end of the diesel excise tax deferral period under EO 14435.
- Gasoline and Diesel Fuel Update — U.S. Energy Information Administration · eia.gov
- Short-Term Energy Outlook, October 2026 — U.S. Energy Information Administration · eia.gov
- The United States Energy Department Continues Execution of Strategic Reserve Release Commitments — U.S. Department of Energy · energy.gov
- Energy Department Initiates Strategic Petroleum Reserve Emergency Exchange to Stabilize Global Oil Supply — U.S. Department of Energy · energy.gov
- Emergency Tax Relief on Diesel Fuel (Executive Order 14435) — The White House · whitehouse.gov
- Fuel Waivers — U.S. Environmental Protection Agency · epa.gov
gov.house is independent and is not affiliated with any government body. This file is journalism, not investment, tax or legal advice. How we work: ethics & standards · Spotted an error? Corrections.