When President Donald Trump announced the ceasefire with Iran and the reopening of the Strait of Hormuz on Tuesday, the oil market immediately reacted, showing a sharp drop in the price per barrel, while regular gas prices have been slower to adjust to the news.
Immediately following news of the ceasefire brokered between the United States and Iran, oil prices plummeted over 18%. Fluctuating since Tuesday, oil prices have largely stayed under $100 per barrel since the ceasefire news, hovering around that price on Thursday morning.
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Before the ceasefire announcement, oil prices had spiked to over $117 per barrel, but largely hovered around $110 in the week leading up to the deal.
Gas prices have not fluctuated comparatively, with the national average for a tank of regular gas staying pegged at about $4.16 per gallon since the ceasefire news.
Oil prices are reacting much more quickly to the news of the ceasefire than gas prices because trade prices generally see much more volatility than the final, consumer-facing price of the product. In this case, gas prices are going to take much longer to adjust to the news that the Strait of Hormuz has opened for oil tankers.
Head of petroleum analysis at GasBuddy, Patrick De Haan, explained the phenomenon in a statement to the Washington Examiner, saying “wholesale prices are volatile, but retail prices are averaged.”
De Haan explained that national average gas prices will fall quite slowly because of “price behavior changes that vary state to state.” He also explained that gas stations across the U.S. have been slow to adjust their latest retail prices fully to match their rising costs, meaning many stations are currently “sitting on fuel they spent much more on.”
“Stations raise prices quickly when costs jump to avoid losses, but when costs fall, they lower prices gradually as they sell through higher-priced inventory. So instead of prices bouncing wildly, what drivers see is actually a slower climb – and an even slower descent,” De Haan said.
According to GasBuddy’s fuel price tracker, the average price of regular gas on Thursday sat at $4.161 per gallon. This is compared to $4.167 on Wednesday, $4.165 on Tuesday, and $4.069 on Monday.
WTI Crude oil prices sat at about $100.43 per barrel on Thursday morning. This is compared to the closing numbers of $94.41 on Wednesday and $112.95 on Tuesday. The trading session closed at 4:00 p.m., before Trump announced the ceasefire. Prices hovered around $112.41 on Monday.
VANCE TO LEAD IRAN PEACE TALKS IN PAKISTAN: ‘THE PRESIDENT’S RIGHT-HAND MAN’
The opening of the Strait of Hormuz has been a crucial sticking point for the U.S. in its negotiations with Iran to bring an end to hostilities. The narrow, oil shipping strait is vital to the worldwide energy market, and its closure during hostilities has thrown the market into an era of uncertainty and volatility.
Vice President JD Vance will lead the U.S. delegation as the country heads into peace talks with Iran in Islamabad, Pakistan, this weekend.
