Gasoline prices are expected to drop below $4 soon as crude oil prices decrease. The nationwide average has risen over $1 per gallon since the Iran War began but is now stabilizing.
Key points
Gasoline prices expected to drop below $4
Nationwide average has risen over $1 since the Iran War
Crude oil prices have decreased significantly
Brent futures around $90 a barrel
U.S. crude under $85 a barrel
Gasoline prices are displayed outside of a Shell gas station in West Hollywood, California on April 14. Prices vary around the country, and are highest on the west coast; the nationwide average has risen by more than $1 per gallon since the start of the Iran War, but is expected to drop if a decrease in crude oil prices is sustained.
Gasoline prices are displayed outside of a Shell gas station in West Hollywood, California on April 14. Prices vary around the country, and are highest on the west coast; the nationwide average has risen by more than $1 per gallon since the start of the Iran War, but is expected to drop if a decrease in crude oil prices is sustained.
Patrick T. Fallon/AFP via Getty Images
Patrick T. Fallon/AFP via Getty Images
Oil prices fell sharply on Friday after Iran declared the Strait of Hormuz open to commercial traffic.
Brent futures, the global benchmark for crude oil, dropped to around $90 a barrel, down more than $10 from a week ago. U.S. crude is under $85 a barrel after rising above $110 at one point in the conflict.
If these current prices hold, drivers should soon start to see prices dropping at the pump, says Patrick De Haan, chief petroleum analyst at the app Gasbuddy. He told reporters in a virtual event that the national average for gasoline, currently above $4 a gallon, could drop below $4 as soon as this weekend and reach $3.65 to $3.85 per gallon "in the next week or two," he says.
Q&A
What is the current average gasoline price in the U.S.?
The current nationwide average gasoline price has risen by more than $1 per gallon since the start of the Iran War.
Why are gasoline prices expected to drop below $4?
Gasoline prices are expected to drop below $4 due to a sustained decrease in crude oil prices.
How much have crude oil prices fallen recently?
Brent futures dropped to around $90 a barrel, down more than $10 from a week ago, while U.S. crude is under $85 a barrel.
What impact did the Iran War have on gasoline prices?
The Iran War has caused gasoline prices to rise by more than $1 per gallon since it began.
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Carlos Ferre holds a gas pump nozzle as he stands near a gas pump at a gas station in Miami on April 6. Behind him is a tall sign that says regular gasoline is $4.29 and diesel is $5.89.
There's usually a slight delay between when crude prices drop and when gasoline prices follow; individual gas stations have already paid high prices to fill their massive underground tanks, and will try to recoup that cost. But wholesale gasoline markets are already showing price drops, he says, just hours after the futures markets. That's unusually fast.
"There's an element of immediate relief," he says. "And more relief will be coming in a month or two when things really start to get fully back on line."
Prices are still volatile and a full recovery will take time
Overall, oil prices are still higher than what they were before the war, when benchmark prices were around $60. And the risk remains that the conflict in the Middle East could take another turn, and oil prices ramp back up again.
Even if peace holds, the market disruption can't be immediately corrected.
The disruption of trade through the Strait of Hormuz, along with attacks on oil infrastructure in the Middle East, made crude prices highly volatile and pushed gasoline prices up by a dollar per gallon on average. By Labor Day, De Haan predicts, about half of that price hike could be reversed.
But getting back to gasoline prices below $3 a gallon on average would take even longer. "For every day that we've been at this, it may take a week for a lot of this to unwind," he says. "So, you know, 47 weeks: That may take until later this year or early next year to really fully normalize."
The energy consultancy Rystad Energy has estimated that the damage to oil and gas facilities in the Middle East may cost as much as $50 billion to repair. Even oil fields and refineries that haven't been damaged can take weeks to restart production; they're not designed to turn on and off overnight.
And even after production restarts, crude oil and fuels still need to spend weeks on tankers to travel around the world.
"Reopening the Strait of Hormuz eases the near term squeeze on oil markets, but it's not a full reset," Angie Gildea, the head of oil and gas for the accounting giant KPMG, tells NPR in an emailed statement. "Damage to gas infrastructure and delayed production mean the price impact could linger for months, even if headline risks fade."
