Updated

Updated · 69News WFMZ-TV · Jun 13

U.S. Gas Prices Swing Near $4 as Iran Tensions and Weaker Demand Pull Costs Lower

Updated

Updated · 69News WFMZ-TV · Jun 13

U.S. Gas Prices Swing Near $4 as Iran Tensions and Weaker Demand Pull Costs Lower

Q: With Mideast tensions and low oil reserves, is this gas price drop just temporary relief?

Yes. The recent drop to about $4.12 a gallon looks more like short-term relief than a durable turn lower. The immediate reason prices have eased is that crude has stayed below $100 a barrel, with WTI settling near $90, and U.S. gasoline production and supply both ticking up. Retail prices also tend to lag wholesale moves by several weeks, so the recent decline reflects some earlier softening in oil markets. But the risks still point upward. The biggest is the Middle East, especially uncertainty around the Strait of Hormuz, a chokepoint for more than one-fifth of global oil flows. Any renewed disruption there can quickly push crude and gasoline higher. Analysts and central bank officials have repeatedly warned that if the conflict drags on, oil could remain elevated for months and keep pressure on inflation. Inventories are another concern. U.S. crude stocks just fell by 7.2 million barrels and are now about 5% below the five-year average, leaving less cushion if supply is hit. Broader market buffers are also thinner than normal, which makes prices more sensitive to shocks. That does not mean a spike is inevitable. Weaker demand in parts of the global economy, including China, and strong U.S. production can help cap prices. The U.S. is also producing and exporting large volumes of energy, which offers some protection. Still, with summer demand rising and geopolitical risk unresolved, the current decline is best seen as a reprieve, not a clear all-clear.

3 articles · Updated · 69News WFMZ-TV · Jun 13

Pump prices that were nearing $5 a gallon weeks ago have slipped to about $4, but the swings are still forcing some drivers and small businesses to cut trips and combine vehicles.
Crude oil makes up about 50% of gasoline costs, and traders are keeping prices from rising further because they expect the fighting tied to Iran to be resolved rather than become a lasting shock.
Supply disruptions around the Strait of Hormuz have also been partly offset by Saudi Arabia and the UAE routing crude through overland pipelines, easing some pressure on fuel markets.
Lower demand after the earlier price spike is adding to the downward pull, even as the broader outlook remains volatile if Middle East tensions worsen again.