U.S. motorists are likely to face higher gas prices for several weeks even if crude oil remains stable, according to GasBuddy petroleum analyst Patrick De Haan.
Global crude prices swung wildly on Monday, soaring to nearly $120 a barrel earlier in the day before dropping after President Trump told CBS News that the U.S. war with Iran could end soon.
Even though Brent crude declined by about 13% on Tuesday, dipping to $85 a barrel, the national average gas price rose to $3.54 per gallon, or 6 cents higher than the previous day, according to AAA.
Gas prices have surged by more than 50 cents per gallon since the war started. The average price was $2.98 per gallon on Feb. 27, the day before the U.S. and Israel launched strikes on Iran, according to GasBuddy data shared with CBS News.
Motorists should expect to pay higher gas prices for the foreseeable future, De Haan told CBS News. Even if crude oil prices continue to dip, gas prices are unlikely to return to their levels before the Iran war began, partly due to seasonal issues that drive up costs each year, he added.
“Where we are at this moment would likely mean the national average is going to stall out here very shortly, in the next 24 to 36 hours, between $3.55 to $3.65” a gallon, De Haan said.
Demand tends to increase as the weather warms up and more cars hit the road, while gas stations also switch to more expensive summer-blend gasoline, which takes longer to produce and includes additives intended to reduce evaporation during warmer months.
Gas stations are required to sell the summer blend from June 1 to September 15 every year, according to American Fuel and Petrochemical Manufacturers, a trade association.
As a result, consumers normally end up paying about 15 cents more per gallon during the summer, according to CBS News Minnesota.
Volatile crude prices
Despite the dip in oil prices on Tuesday, the price of crude remains about 20% higher than prior to the U.S. war with Iran.
Brent crude, the international benchmark, has jumped to about $85 a barrel from roughly $70 at the end of February. West Texas Intermediate, the U.S. benchmark, has soared about 25%, rising to about $80 from $67 over the same time.
“Oil prices have been exceptionally volatile. Today they are dropping, yesterday they were spiking up,” said Wayne Winegarden, senior fellow in business and economics at the Pacific Research Institute, a nonprofit think tank. “It is difficult for producers to accurately price gasoline in such an environment.”
“Until greater clarity emerges, we will likely continue to experience this pricing rollercoaster,” he added.
Strait of Hormuz
Petroleum prices are likely to remain elevated as long as security risks remain in the Strait of Hormuz, De Haan added. About 20% of the world’s oil supply travels through the narrow waterway.
Tankers remain reluctant to sail through the channel after Iran last week threatened to set vessels ablaze. According to a tracker from Bloomberg, the strait remained effectively closed as of Tuesday, aside from some Iran-linked traffic.
“The market is badly looking for clarity on what the next move might be, whether that’s a reopening of the Strait of Hormuz,” De Haan told CBS News. “Once ships start sailing, that’s when the relief will hit.”
President Trump assuaged some concerns in the markets after signaling that the war could soon come to a close and offering to ramp up protection in the strait.
“Markets are beginning to trade the end of the conflict before it has actually happened,” Nigel Green, CEO of deVere Group, an investment advisory firm, said in an email. “Oil dropping back below $90 and equities pushing higher tells us investors are already pricing a scenario in which tensions cool and supply disruptions remain limited.”
Mr. Trump on Tuesday told CBS News senior White House correspondent Weijia Jiang on Monday that the U.S. “could do a lot” about the strait and threatened Iran if it tries to disrupt shipping in the waterway. Later on Monday, he signaled that the U.S. military could get involved in keeping the strait open and predicted the war could end “very soon.”
However, Iran’s foreign minister said Tuesday his country was prepared to continue attacks for as long as necessary, while also ruling out talks with the U.S.
