The U.S. Environmental Protection Agency authorized an early transition to winter-grade gasoline on Thursday, allowing sales of 10% ethanol-blended fuel to begin September 1 instead of mid-month. The move is intended to increase domestic gasoline supply by hundreds of thousands of barrels per day and provide relief at a time when average pump prices have remained above $4 per gallon since mid-July.
The waiver comes as the Biden administration intensifies pressure on Iran, with Treasury Secretary Scott Bessent pledging 'the toughest sanctions in history' against Tehran during an interview with CNBC. Bessent also urged international cooperation, including from China, and questioned why oil prices rose following the announcement, suggesting markets may be misinterpreting the campaign's impact.
Despite Washington's efforts to tighten sanctions—amid a six-month conflict—oil traders remain skeptical about the bearish implications. The Energy Department recently revised its outlook, forecasting elevated fuel prices through year-end as negotiations to reopen the Strait of Hormuz have stalled. The EPA's waiver relaxes summertime low-volatility requirements, though state-level fuel regulations could delay the full supply impact in some regions.
The measure follows other recent supply-side adjustments, including temporary easing of Jones Act shipping restrictions and expanded sales of higher-ethanol E15 gasoline this summer. While these steps aim to mitigate price pressures, they do not address the core disruption in global oil transit through the Strait of Hormuz, leaving markets to grapple with persistent supply risks.
