US Fuel Prices Expected to Take Months to Normalize After Iran Deal

US Oil Prices Remain Elevated Despite Preliminary Deal with Iran

A preliminary agreement between the US and Iran has led to a decline in oil prices, but experts warn that major relief for American consumers may take several months. The deal aims to reopen the Strait of Hormuz, which has been closed since the conflict began, disrupting global energy markets.

The closure of the strait had cut off approximately one-fifth of the world’s oil and liquefied natural gas shipments, leading to a sharp increase in prices worldwide. According to data from the American Automobile Association (AAA), petrol prices in the US remained above $4 per gallon on Monday, averaging $4.06 nationwide.

The agreement has led to a decrease in global energy markets, with Asian markets relying more heavily on oil shipped through the Strait of Hormuz than North American markets. However, tighter supply and steady demand have pushed prices higher worldwide.

Energy prices have risen sharply in the US over the past few months, increasing 7.7 percent over the last two months alone, and are up 40 percent from a year ago. While prices are beginning to fall, experts expect a plateau and warn that consumers may not see gas prices at pre-war levels until 2027.

Producers will need time to ramp up output, while port bottlenecks and heightened summer demand could delay any substantial relief for everyday consumers. The International Energy Agency reported that oil production slumped amid the war, with over 14 million barrels per day shut down, or approximately 14 percent of the world’s demand.

The agreement opening the blockade is for a 60-day negotiation period between the two countries. Some experts believe that producers may be reluctant to bring full operations back online until they can see the ceasefire hold, as the last thing they want to do is restart production only to have the conflict revived and shut it down again.

Source: Al Jazeera