Motorists could begin seeing relief at the gas pump within the next week if negotiations to reopen the Strait of Hormuz are successful, but analysts say a return to significantly lower fuel prices is likely to take several more months.
National average gasoline prices have edged slightly lower in recent days as crude oil prices have fallen sharply on expectations that shipping through the strategic waterway could resume. The national average stood just above $4 per gallon this week, down only a few cents from recent highs.
Energy analysts say prices could dip below the $4 mark within days if the Strait of Hormuz reopens and oil shipments resume. However, a return to gasoline prices near $3.50 per gallon is not expected until late fall or early winter.
Oil prices have declined nearly 10% since late July as hopes for easing tensions in the Middle East have grown. Brent crude, the international benchmark, recently fell below $80 per barrel for the first time in several weeks, while U.S. crude also posted steep declines.
Despite lower crude prices, gasoline prices often lag because retailers are still selling fuel purchased at higher wholesale costs. Additional factors could also slow price declines.
Even if an agreement is reached, reopening the Strait of Hormuz is expected to take time because shipping lanes must be cleared of mines and debris from damaged vessels. The waterway normally handles about 20% of the world’s seaborne crude oil shipments.
Analysts also note that many countries drew from their strategic petroleum reserves during the U.S.-Israel-Iran conflict and will likely begin replenishing those stockpiles once oil exports resume, creating additional demand that could keep prices from falling rapidly.
The ongoing war between Russia and Ukraine also continues to influence global energy markets, adding another source of uncertainty.
Lower oil prices have helped boost the stock market in recent days, sending major indexes to record highs, while shares of several large energy companies moved lower as investors anticipated reduced profits if crude prices continue to fall.
For now, analysts say drivers can expect modest relief in the short term, but substantial declines at the pump will depend on lasting stability in global oil markets and the successful restoration of shipping through the Strait of Hormuz.
Source: The Street