President Donald Trump announced a two-week ceasefire in the war with Iran this week. But Americans who thought that would immediately lower gas prices are likely in for some disappointment.
Market experts believe U.S. consumers will continue to pay high prices to fill up their vehicles or purchase airplane tickets through the peak summer travel season.
Several market exerts told Reuters this week that high fuel prices resulting from Iran’s blockade of the Strait of Hormuz have become a major issue.
Reuters reported that, after Trump announced a two-week ceasefire deal on Tuesday, U.S. crude oil futures fell nearly $20, and U.S. gasoline and diesel futures also fell sharply, as traders bet on a potential reopening of the Strait of Hormuz.
But those same experts said that falling crude futures probably will not bring quick relief for consumers at the pumps, noting that cracks had already begun to appear in the fragile truce. The Strait of Hormuz remained closed on Wednesday after Israel launched its biggest attacks yet on Lebanon. Iran also hit a pipeline that Saudi Arabia has been relying on to bypass the Hormuz.
“There’s so much uncertainty still around what this ceasefire means, and when and how fuel starts to flow through the Strait of Hormuz again, retailers are not going to drop prices sharply in the face of those unknowns,” Shon Hiatt, director of the Zage Business of Energy Initiative at the USC Marshall School of Business, told Reuters.
In any case, retail fuel prices rise a lot faster than they drop, as fuel sellers will work through higher-priced inventory and seek a higher degree of certainty of future supply to avoid losses, Hiatt said. “Prices go up like a rocket, and they fall like a feather.”
U.S. retail gasoline eased a penny to $4.16 a gallon as of mid-day Wednesday, from a near four-year high of $4.17 a gallon on Tuesday, data from GasBuddy showed.
“If everything were to freeze right now, the national average could fall 5 or 10 cents a gallon for gasoline by this time next week,” GasBuddy analyst Patrick De Haan said.
As of Tuesday, the price at the pumps for gasoline remained nearly a dollar higher than last year’s average, GasBuddy data showed.
