If you wanted to design a moment that should, in theory, accelerate an energy transition in American transport, you would start with something close to what we have right now. Brent crude above $100 a barrel. National average gasoline at US$4 a gallon (US$6 in California) for the first time since 2022. Diesel up 45% in a month. Consumers feeling the pain at the pump. This is the kind of shock that, historically, has pushed people and governments toward more efficient vehicles, cleaner and alternative fuels.
Two questions follow from this. The first is whether fuel prices will stay high long enough to actually drive that kind of change. The second, and perhaps more consequential, is what happens if they do. On the second question, the answer might end up being very uncomfortable for the Administration and Congress, largely because of decisions they made before February 28.
First: Is this shock sustained or transitory?
It is genuinely too early to say, though there’s lots of chatter out there about reigniting the energy transition. The conflict/war is a month old. The IEA has called this the largest supply disruption in the history of global oil markets, and the physical nature of the Hormuz closure makes it structurally different from sanctions-based disruptions, which can be routed around. Tanker traffic through the Strait has fallen to a fraction of its normal volume. Gulf producers have cut output because they are running out of storage capacity. Damage to energy infrastructure in the region will take time to repair even after hostilities end.
And yet the EIA’s March forecast has Brent falling back below US$80 by the third quarter, assuming the Strait disruption resolves. Goldman Sachs puts a 60% probability on the conflict ending this month, with prices subsequently falling, though remaining above pre-war levels. A spike that resolves in weeks produces pain at the pump but not the sustained high price environment that historically changes how consumers buy vehicles, how fleet operators plan procurement, or how governments design policy.
History is instructive on this point. After the 1979 oil shock, global oil demand fell 11% over four years and oil’s share of OECD energy consumption dropped 7 percentage points over five years. Those were lasting shifts. But they required prices to stay elevated over years, not weeks. When oil spiked after Russia invaded Ukraine in 2022, the near-term effects were mixed. The IEA concluded the shock gave a short-term boost to fossil fuel demand alongside longer-term gains for renewables, primarily in the power sector. The durable changes came where clean alternatives were already affordable and policy support was already in place. Transport barely moved.
The duration of the current conflict/war, and whether prices remain elevated long enough to shift consumer behavior and investment decisions, is the central unknown. Anyone telling you confidently that this shock will or will not transform the energy transition is getting ahead of the evidence.
Second: If prices do stay high, the Administration has a problem
Assume, for the sake of argument, that the conflict extends, the Strait remains disrupted for months, and US$4++ gasoline becomes the norm through the summer and beyond. Historically, that is the kind of environment that generates real pressure for alternatives. Consumers look harder at fuel-efficient vehicles, including EVs, as well as alternative fuels and biofuels. Fleet operators accelerate plans to diversify away from diesel. Policymakers face angry constituents asking what they are doing about it.
The difficulty for the Trump Administration and the current Republican-controlled Congress that I haven’t seen anyone point out is that it spent the better part of the past year removing or weakening most of the tools that would allow the federal government to respond to exactly these kinds of pressures. Let’s review a short list of examples:
- Congress terminated the US$7,500 consumer EV purchase credit under Section 30D and the commercial clean vehicle credit under Section 45W for vehicles acquired after Sept. 30, 2025.
- Congress reshaped Section 45Z clean fuel production credit to remove the SAF multiplier and exclude non-North American feedstocks which constrains some biofuels producers.
- Congress terminated the Section 45V clean hydrogen credit 5 years ahead of schedule.
- Congress terminated California’s waivers for its light- and heavy-duty vehicle electrification programs (e.g., Advanced Clean Cars II, Advanced Clean Trucks).
- The Administration through the National Highway Traffic Safety Administration (NHTSA) is in the process of revoking Biden-era fuel economy standards and setting less stringent standards.
- The Administration through the Environmental Protection Agency (EPA) revoked vehicle GHG standards, which are now being challenged in court.
The practical result is visible right now. EV sales fell some 46% in the fourth quarter of 2025 compared to the third quarter, and 36% compared to the fourth quarter of 2024, according to Cox Automotive. Several automakers have taken massive write downs totaling at least US$60 billion. The consumer who wants to respond to US$4++ gasoline by buying a new EV needs it to be affordable at the point of purchase. For a large share of American buyers, it currently is not, and there is no federal mechanism in place to change that. Used EV sales are rising as lease returns flood the market, but a used EV sale moves an existing vehicle between owners. It does not add new capacity to the fleet.
In the biofuels sector, it’s true that EPA did waive RVP restrictions on nationwide E15 sales May 1-20, 2026, but that is unlikely to bring consumers meaningful relief at the pump for now. E15 mandate legislation has been proposed but not passed by Congress to date. EPA also finalized record-high blending mandates under the Renewable Fuels Standard (RFS2) program on March 27, requiring roughly a 60% increase in biomass-based diesel (BBD) volumes in 2026. That is a genuine policy lever still in operation.
The Administration has pointed to the record RFS volumes as part of its response to rising fuel costs, but the mandate is a structural tool for long-term biofuel demand, not a mechanism for near-term price relief. There is also a basic supply question: biodiesel production was down 31% in 2025 and the industry spent much of the year idling plants and absorbing losses. Bringing that capacity back online takes months, not weeks, and a significant portion of the 2026 compliance year has already passed without the industry operating anywhere near the required volumes.
The targets also raises compliance costs for oil refiners, who must either blend more biofuel or purchase credits (RINs), costs that are typically passed through to consumers at least in part, meaning the net price effect at the pump is ambiguous at best. Even a full recovery in domestic renewable diesel and biodiesel production would represent a small fraction of total diesel supply, and the price effect would be marginal relative to a shock that has removed roughly 20 million barrels of oil per day from normal global flows.
What this means right now
The bottom line is that if sustained high fuel prices create political pressure to do something about transport energy, the Administration’s options are constrained by its own prior decisions. None of this forecloses the possibility of change. Sustained high prices, if they materialize, have historically been the most powerful driver of lasting shifts in transport energy. The conflict/war is serious enough, and the supply disruption significant enough, that a prolonged price environment remains a real possibility. Political pressure has a way of producing policy responses that seemed unlikely beforehand.
But the starting position matters. The Administration and Congress enters this potential inflection point having spent the past year making it harder to respond to exactly the kind of shock that has now arrived. Whether that changes depends on how long prices stay elevated. What then?
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