Everything Costs More and the Worst Part Hasn't Started

A gallon of gas in McHenry County costs about $1.30 more than it did a year ago. Most stations along Route 23 and Grant Highway are between $4.45 and $4.65, according to GasBuddy data. ¹ A year ago, the same stations were under $3.20. For a household with a 34-minute commute each way, the Census Bureau average for the county, the increase adds $60 to $80 a month to the fuel bill alone.

The cause is not a market cycle. U.S. and Israeli military strikes on Iran beginning February 28 triggered retaliatory attacks and an effective closure of the Strait of Hormuz, the chokepoint that carries roughly 20% of the world's oil supply. The Federal Reserve Bank of Dallas described the disruption as three to five times larger than any previous oil supply shock. ² Brent crude has risen above $110 per barrel and briefly touched $126. ³

Strait of Hormuz Oil export terminal Tanker routes

Sources: EIA, Atlantic Council. Terminal locations are approximate.

In inflation-adjusted terms, today's national average of $3.96 per gallon has not yet reached the peaks of prior crises: the 2008 oil spike hit roughly $6.00 in today's dollars, and the June 2022 post-COVID peak reached $5.46. ¹⁴ That comparison is misleading. The Dallas Fed described Hormuz as three to five times larger than any of those earlier disruptions. ² The price has not caught up to the scale of the shock.

EIA, inflationdata.com, U.S. Dept. of Energy

The EIA's March Short-Term Energy Outlook projects Brent crude staying above $95 per barrel for at least the next two months before falling below $80 in the third quarter, assuming no further escalation. ⁴ In other words, current pump prices are a floor, not a spike.

The White House has emphasized that the United States is the world's largest oil producer, at roughly 13.6 million barrels per day, and has been a net petroleum exporter since 2020. ¹⁵ Both statements are true. Neither explains why prices are rising in Marengo. Oil is priced on a global market. When 20% of global supply is disrupted, the price moves everywhere, regardless of where the oil comes from. American producers sell at the same global benchmark as everyone else. Domestic production does not mean domestic pricing.

There is a second problem. U.S. refineries, particularly along the Gulf Coast, are configured to process specific grades of crude, including heavier blends that are still imported. The Strategic Petroleum Reserve, drawn down by roughly 40% during the 2022 energy crisis, has not been fully replenished. ¹⁶ The administration authorized a release of 30 million barrels in early March, enough to cover about a day and a half of national consumption. Production capacity is not the same as price insulation, and the tools available to close the gap are smaller than they were four years ago.

Diesel has risen even more steeply. The USDA's Agricultural Marketing Service reported Illinois diesel at $3.90 per gallon on March 6, up $0.76 from the previous reading, and noted that prices could exceed $4.50 if crude continues climbing. ⁵ The city's public works fleet, the police department's patrol vehicles, and every farm operation around Marengo run on diesel. Gas is the visible cost. Diesel is the one that runs through everything.

At the March 9 council meeting, City Administrator Derik Morefield noted that fuel line items in the current budget are tracking above projections. ⁶ No supplemental appropriation has been proposed. The FY2026-27 budget was balanced with a margin of $3,196. Whether the overrun triggers a supplemental request, delays capital projects, or forces adjustments to seasonal staffing are open questions. Staff said they are monitoring the situation. There is not much to monitor with.

That is the picture today. The part that has not arrived yet is worse.

Planting season starts in weeks. Diesel is the primary fuel for the equipment, and anhydrous ammonia, the primary nitrogen fertilizer for corn, is above $900 per ton. ⁵ The University of Illinois farmdoc team published an analysis on March 17 examining the conflict's impact on 2026 crop returns. ⁷ Their earlier budgets, from August, projected negative returns of $72 to $111 per acre for corn on cash-rented land across Illinois. Those projections assumed oil under $80 a barrel.

Higher commodity prices would normally offset the pain. December corn futures rose $0.31 per bushel and November soybean futures rose $0.40 in the two weeks after the conflict began. ⁷ But the cost side is moving faster. Most Illinois farmers pre-priced their nitrogen before February. Those who did not are now choosing between sharply higher input costs and a shift to soybeans, which do not require nitrogen.

The fertilizer problem goes beyond price. The Atlantic Council reported that roughly one-third of global fertilizer trade transits the Strait of Hormuz, including large volumes of nitrogen exports from the Persian Gulf. ⁸ Shipments that need to be applied in April or May were ordered in March. They are unlikely to arrive at U.S. Gulf Coast ports on time. The Atlantic Council projected that American farmers may shift up to 1.5 million acres nationally from corn to soybeans as a result. Illinois, the nation's largest soybean producer, is among the most exposed states.

Soybeans would be the escape valve, except the escape valve is broken. China, which typically purchased $805 million in Illinois soybeans per year, has redirected to Brazil and Argentina under retaliatory tariffs. It now costs more to plant a crop that will sell for less. Illinois Agriculture Director Jerry Costello II told Capitol News Illinois that the $12 billion federal aid package announced in December is "not nearly enough to make up for the losses farmers are suffering." ⁹

Tariffs are crushing farmers again. Financial losses are worse this time around, yet the aid package is 50% smaller. The money being offered now is not nearly enough to make up for the losses farmers are suffering.

Illinois Agriculture Director Jerry Costello II, to Capitol News Illinois

The conflict is drawing National Guard units from across the country. Wisconsin has deployed more than 400 soldiers, Louisiana roughly 1,000, and North Carolina about 800. The Pentagon is considering sending 10,000 additional troops to the Middle East on top of active-duty forces already in theater. ¹⁰ Illinois has not announced a Guard mobilization for the Iran operation, but the 2nd Battalion, 130th Infantry, based in downstate Illinois, returned from the Middle East only in December after a separate deployment that overlapped with the earlier 12-Day War between Israel and Iran. For Guard families in McHenry County, the question is not whether Illinois units will be called but when.

Illinois is paying more at the pump than the national average. The EIA's weekly data for the week ending March 23 puts the national average for regular gasoline at $3.96. The Chicago metro area, the closest EIA benchmark, is at $4.18, and local stations are higher still, reflecting a combined motor fuel tax of 45.4 cents per gallon, among the highest in the country. ¹¹ The state tax nearly doubled in 2019, from 19 to 38 cents, as part of the Rebuild Illinois capital program, and adjusts annually for inflation. Every penny of the global price increase is amplified by the tax structure.

In Washington, the conflict has scrambled the usual coalitions. Republican farm-state members have tried to attach a $15 billion tariff relief measure to the defense spending bill. GOP leadership has blocked those efforts. Anti-war resolutions introduced by members of both parties have not advanced in committee. ¹² The Pentagon told Congress the first six days of the operation cost $11.3 billion, and daily costs are running between $1 billion and $2 billion. ¹³ No one is proposing a way to make any of this cheaper.

The fields along Route 23 and Harmony Road will be planted regardless, because the alternative is to leave productive land idle. The farmdoc team's March 17 analysis concluded that profitability prospects for 2026 are "likely reduced" even for growers who pre-priced most of their inputs. ⁷ For those who did not, the math is worse. The margin between farming at a loss and not farming at all is thinner than it has been in years.

As of March 26, the Strait of Hormuz remains effectively closed. No diplomatic resolution is under active negotiation. The EIA's projections assume no further escalation, but the conflict has escalated at every stage so far. Planting decisions that cannot be reversed are being made this week and next on the basis of prices that have not finished rising. This is a developing story. Marengo Post will continue to track local costs, city budget impacts, and farm conditions as the situation evolves.