Gas prices should soon start easing if ceasefire holds, analysts say

Some relief at the gas pump may be on the way, at least for now.

With oil prices falling Wednesday after the United States and Iran agreed to a two-week ceasefire that could allow oil tankers to pass through the Strait of Hormuz, gas prices may also begin to slowly decline, analysts say. USA West Texas Central Crude futures were trading at around $95 at midday Wednesday; the day before it was about $113. Similarly, Brent Crude futures fell from $109 to $95 on Tuesday.

“I expect some relief at the pump starting this weekend, and we could see a drop of 10 to 20 cents per gallon over the next few weeks,” said Andy Lipow, president of Lipow Oil Associates in Houston.

“Of course, this all depends on maintaining the ceasefire, and we’re not going back to war with Iran in two weeks,” Lipow said.

$4.16 per gallon nationally

The national average for gas prices Wednesday was $4.16, according to GasBuddy. Before the Iran conflict began on February 28, this average was just under $3. But it has also been higher in recent years: It reached an average of $5.01 in June 2022 due to supply disruption and increased demand resulting from Russia’s invasion of Ukraine.

While the current ceasefire with Iran is not a permanent peace plan, “the market is predicting that the ceasefire will at least be a start to getting more oil into the market,” Lipow said.

According to the report, ship transits through the Strait of Hormuz dropped from around 130 per day before the war to just six per day in March. United Nations Conference on Trade and Development. Since Tuesday’s ceasefire, there has been only a slow flow of traffic across the strait.

If the strait remains open in the long term, “it will likely take a few weeks for oil to fall more significantly as supply will take time to recover, which could mean it could take several months for gas prices to return to normal levels,” said Patrick De Haan, head of oil analysis at GasBuddy.

Lipow said it could take longer. “The oil market will not return to pre-conflict levels because they will price in higher geopolitical risk in the Middle East,” he said. “If Iran managed to close the Strait of Hormuz once, it can do it again.”

Summer prices may suppress

At the same time, some seasonal trends are putting increasing pressure on prices. De Haan said gas stations are beginning the annual switch to summer blend gasoline, which is generally more expensive to produce and arrives when demand increases due to spring and summer travel.

“The EPA requires a blend with lower volatility during the warmer months to reduce emissions, which is a more complex and expensive process for refineries,” De Haan said. he said.

Additionally, refineries frequently complete seasonal maintenance, which could temporarily limit supply, he said.

In other words, the combination of continued uncertainty and normal rising demand in the Persian Gulf region means a likely slow easing in gas prices.

If the ceasefire doesn’t hold or lead to a peace deal and the United States continues its war with Iran, “you’ll see prices rise again,” Lipow said.