Will gas prices keep falling? Experts weigh in
Gas prices have dropped more than 13% over the past month.
Gas prices have tumbled in recent weeks as fighting in the Middle East has largely given way to negotiations between the United States and Iran.
The national average price of a gallon of gas stood at $3.92 on Monday, marking a decline of 62 cents, or 13.6%, since a month earlier, AAA data showed.
Still, prices remain well above where they were before the historic oil shock set off by the Iran war. In late February, a gallon of gas sold for an average price of less than $3.
Many drivers and analysts remain focused on a single question: Can gasoline prices keep falling – and, if so, how much lower will they go?
Prices at the pump may very well continue to drop over the coming weeks as tanker traffic stands poised to resume in the Strait of Hormuz under the terms of an agreement between the U.S. and Iran, some analysts told ABC News. The potential burst of supply, they said, would likely push oil prices lower, which in turn would reduce fuel costs.
However, the decline in oil prices over recent weeks is expected to slow, the experts noted. Some of the anticipated oil supply is already baked into current gasoline prices, they added, while further noting that demand would keep prices elevated as countries move to refill depleted oil reserves and travelers hit the road for summer vacation.
"I suspect we’ll see a continued drop in gas prices over the coming weeks, but at some point this will slow down,” Tyler Schipper, a professor of economics at the University of St. Thomas, Minnesota, told ABC News.
The Middle East conflict prompted the Iranian closure of the Strait of Hormuz, a maritime trading route that facilitates the transport of about one-fifth of global oil supply. The standoff triggered one of the largest oil shocks ever recorded, sending gasoline prices higher.
Oil and gasoline prices began to fall in mid-May, however, as Iran and the U.S. appeared willing to strike an agreement that would reopen the strait. The West Texas Intermediate futures price, the benchmark index for U.S. trading, registered at about $75.50 per barrel on Monday, a drop of more than 20% from a month earlier.
Delegations from the United States and Iran arrived over the weekend at the Bürgenstock resort in Switzerland, where they entered negotiations aimed at a war-ending deal based on a memorandum of understanding signed last week by both countries.
The memorandum in part called on Iran to allow commercial shipping to resume through the strait, and to do so toll-free for the next 60 days. On Saturday, however, Iranian officials said the country would shut down traffic in the strait altogether in response to Israeli attacks on Southern Lebanon.
“The key is the Strait of Hormuz,” Tom Seng, a professor of energy finance at Texas Christian University, told ABC News. “There’s the perception that there are millions of barrels of crude sitting in tankers upstream of the strait," he said, speaking to the generally held investors' belief. "The more that can come through, the better.”
Seng said the national average price of a gallon of gas could fall as low as $3.50 over the coming weeks. Hugh Daigle, a professor at the University of Texas at Austin who studies petroleum, agreed.
“If there’s more positive news in these negotiations, you’ll see gas prices fall,” Daigle said.
Still, analysts warned that an array of forces could limit or delay the drawdown in prices. An annual surge in demand is set to take hold over the summer months, putting upward pressure on fuel costs, they said. If prices were to fall, meanwhile, a larger share of buyers would be able to afford gas at the reduced prices, pushing demand even higher.
The oil shock at the outset of the war prompted the largest-ever release of oil from countries’ reserves. “Countries will be going out and buying oil to replenish those reserves,” Seng said.
Alongside these risks, damaged oil infrastructure and potential shipping fees in the strait could impose long-term pressure on oil prices. As result, gas prices will not return to pre-war levels until next year at the earliest, according to Schipper and Seng.
Even more, some analysts cautioned that a major snag in U.S.-Iran negotiations or a resumption of fighting could reverse some of the price relief.
"The outlook is far from settled," Patrick De Haan, a petroleum analyst at GasBuddy, said in a post on X on Monday. Unrest in the strait "could push oil prices higher in the days ahead," De Haan added.
"Despite this, gasoline prices aren’t yet at significant risk of a spike, as some vessels have continued to move through the Strait. Still, should the situation worsen or escalate further, motorists could see that risk change quickly," he said.
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