Gas prices are dropping - but they're still high

The U.S. average price for regular gasoline is $4.39 per gallon, down 16 cents over the past week. Prices are experiencing the largest weekly drop of the year as the U.S. and Iran move closer to a possible ceasefire extension. Retail gasoline prices track global oil prices even though the U.S. produces the most oil and imports relatively little from the Middle East. Oil prices have generally trended lower since mid-May, but a return to pre-war prices is unlikely. Even with a U.S.-Iran deal, tanker transit through the Strait of Hormuz may not resume quickly, and global supply remains tight as stockpiles decline. Re-establishing steady exports may take two to three months after mine clearance, while summer demand and below-average inventories can limit further price declines.

"The U.S. average price for regular is $4.39 per gallon on Friday, per AAA - down 16 cents over the last week as the U.S. and Iran closed in on a possible deal to extend the ceasefire. But it's still far above the roughly $3 that Americans were paying right before the war started. Prices are seeing their largest weekly drop of the year, Patrick De Haan, head of petroleum analysis at the fuel data and analysis firm GasBuddy, posted on X."

"Retail gas prices are tethered to oil prices set on global markets, even though the U.S. is the world's largest producer and imports relatively little from the Middle East. Gasoline is falling as oil prices - while volatile - have been trending generally lower since mid-May. Yes, but: Don't expect a quick return to pre-war prices or anything close for the foreseeable future - and prices could rise again."

"Even if a U.S.-Iran deal becomes official, it's not clear whether tanker owners will feel confident enough to transit the Strait of Hormuz in large numbers anytime soon. And even if they do, the global market will remain tight for a long time - and the situation is getting even more dire as countries' stockpiles are drawn down. "Following the clearance of any mines, a minimum of two to three months will likely be required to re‑establish steady export operations," the International Energy Agency said in its mid-May oil market report."

"Plus, Persian Gulf countries that cut production when the main export route closed will need to revive it - and it's not like flipping a switch. And oil prices include the potential for the fighting to start again, which is definitely not zero. Zoom out: Other structural forces will actas a check on how much pump prices fall. One is that U.S. fuel demand is higher in the summer. U.S. gasoline inventories fell again the week ending May 22, and are 6% below the five-year average for this time of year, the U.S. Energy Information Administration report"

Read at Axios