Gas prices are falling toward $4 a gallon but outlook uncertain, analysts say

Gas prices have fallen toward $4 per gallon in recent weeks, nearing the milestone as oil costs have eased in response to negotiations between the United States and Iran.

The national average price of a gallon of gas stands at $4.10, marking a decline of 40 cents, or 8.8%, over the past month, AAA data showed. Gas prices, however, remain $1.12 higher than where they stood before the Iran war.

The national average price could drop below $4 over the coming days, though that outcome is hardly guaranteed, some analysts said. An ongoing global oil shortage threatens to rekindle price increases, especially in the event of escalating tensions in the Middle East, they added.

Ramanan Krishnamoorti, a professor of petroleum engineering at the University of Houston, said he expects gas prices to fall below $4 a gallon within as little as seven days.

Still, he voiced uncertainty about the staying power of the potential relief.

"I think you should be very, very skeptical," Krishanamoorti said. "Any global challenge is likely to put significant upward pressure on gasoline prices in the U.S."

A similar sentiment came on Friday from Patrick De Haan, a petroleum analyst at GasBuddy, who posted on X saying a drop below $4 a gallon would happen "soon."

"Permanent?" De Haan added. "Too early to tell."

Gas prices stood below $4 as recently as late March. Before topping $4 a gallon on March 31, the national average gas price had stayed below $4 for nearly four years.

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 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.

In recent days, top officials for the U.S. and Iran have indicated that the two sides are nearing a deal, though they have offered differing accounts of the potential agreement. Pakistani Prime Minister Shehbaz Sharif said a "final, agreed upon text of the peace deal has been reached" between the U.S. and Iran, in a post on X.

"Pakistan is now working closely with both sides to finalize the next steps," Sharif wrote Friday. "Peace has never been this close as it is now."

On Friday, U.S. oil prices fell to about $84 a barrel, marking a drop of about 20% since a recent peak on May 19.

Crude oil is the main ingredient in auto fuel, accounting for more than half of the price paid at the pump, according to the federal U.S. Energy Information Administration.

The U.S. is a net exporter of petroleum, meaning the country produces more oil than it consumes. But since oil prices are set on a global market, U.S. prices move in response to swings in worldwide supply and demand.

Still, oil prices have proven volatile over the course of the Iran war, some analysts noted.

Timothy Fitzgerald, a professor of business economics at the University of Tennessee who studies the petroleum industry, cast doubt on the likelihood of a drop below $4, saying the price of oil -- and, in turn, gasoline -- could instead rise over the coming days if tensions ratchet up in the Middle East.

"The oil market is looking for evidence of a resolution -- not just green shoots or hopes," Fitzgerald said.

Gas prices usually fall at a slower pace than they rise, since retailers prefer to keep prices elevated as they sell through inventory acquired at high cost, some analysts said.

"I'd expect the distribution system to be conservative in terms of how that drop in oil prices gets passed through," Fitzgerald said. "It may get passed through eventually."