Gas prices continue to soar in New Hampshire amid Iran conflict

Gas prices in New Hampshire average $3.85/gal (national $4.06) and are rising more than a month after the Iran conflict, as Iran has closed the Strait of Hormuz — a route carrying ~20% of global oil. New England relies on the Irving Oil refinery (supplying ~80% of the region's fuel), and experts warn prices will likely climb further with the summer gasoline switch and ongoing supply disruptions; diesel and heating oil are also under upward pressure. A temporary Jones Act waiver was discussed but is considered unlikely to materially re-route supply in time.

Analysis

Regional fuel market structure is breaking in a way that favours refiners with flexible access to alternate shipping lanes and Gulf Coast export arbitrage. New England’s reliance on a small number of cross-border and coastal supply routes means local crack spreads can diverge by 15-30% from national averages in a supply shock, creating outsized near-term margin capture for Gulf refiners that can send cargoes to the front of the queue.

The immediate drivers are a short-term physical bottleneck (vessel diversion, insurance/reroute costs) and the seasonal switch to summer blends, which together compress local availability for gasoline, diesel and heating oil. These effects operate on a weeks-to-months horizon — inventory draws and elevated freight will amplify price moves until either a diplomatic de-escalation, SPR release, or logistical rebalancing (repositioning of barges/tankers) restores flows.

Second-order winners include Gulf refiners with export capability and US storage owners; losers are regional distributors, independent convenience retailers with low hedges, and inland logistics companies facing higher diesel costs that feed through to trucking margins and services inflation. Tail risks include prolonged Strait disruption or an insurance-market shock that raises tanker premiums materially, which would sustain higher product-on-water premia for months and force policy responses.

A plausible contrarian outcome: market pricing assumes prolonged closure, but re-routing around the Cape, temporary SPR releases, or limited tactical diplomatic fixes could unwind much of the premium within 4–8 weeks. Watch cross-PADD gasoline and ULSD spreads and product-on-water inflows as the high-frequency indicators that would invalidate the current supply-tightness trade.

Key Decisions for Investors

• Directional short-term (1–3 months): Buy RBOB gasoline call-spread (long delta ~0.30, short higher strike) for July expiries — defined-premium risk with asymmetric upside if regional gasoline rises ~8–15%; target 2–4x return on premium, max loss = premium.
• Refiner long (3–6 months): Overweight Gulf-focused integrated refiners (e.g., VLO, MPC) — these capture widening crack spreads and export premiums. Size tactically (2–4% portfolio), target 25–40% upside if regional cracks widen, stop-loss at -20% absolute.
• Relative pair (3 months): Long VLO / short PBF — arbitrage Gulf export access vs East Coast distribution exposure. This isolates premium capture vs regional supply shortfall; use equal notional sizing and tighten stops to 15% on pair volatility.
• Consumer-cost hedge / short (1–3 months): Buy puts on the airline ETF (JETS) or short selective airlines with low fuel hedges (e.g., UAL) — downside if jet/diesel fuel spikes compress airline margins; aim for 1.5–2x payoff vs premium paid.
• Medium-term protection (6–12 months): Accumulate ULSD (heating oil) call positions into winter or long HO futures to hedge against extended diesel/heating oil tightness — useful insurance if the shipping disruption persists, target 3–6x payoff vs cost of carry.