Gas prices back at $4 a gallon
By Chris Isidore, CNN
(CNN) — The average price US drivers pay for a gallon of gas hit $4 on Monday, as fighting between the United States and Iran intensified, further disrupting oil flows through the Strait of Hormuz.
The average price is now just above $4 a gallon, according to AAA. Gas first crossed the $4 mark, a psychologically important threshold, on March 31, a month into the conflict.
Prices have jumped from $2.98 a gallon on average before the war as the conflict has cut off most oil flowing through the critical Strait of Hormuz.
In early May, gasoline prices rose to a four-year high of $4.56 before falling on hopes that negotiations between Iran and the United States would reopen the waterway and release oil tankers that had been trapped in the Persian Gulf.
The two countries signed a memorandum of understanding on June 14 to halt hostilities, prompting gas to fall back below $4 a few days later.
But prices at the pump began to climb again after Iran resumed attacks on ships trying to exit the strait and after the US retaliated and put a blockade on Iranian ports. The average price is up about 13 cents over the past week.
Gasoline prices rose alongside oil prices, with Brent crude briefly climbing above $90 a barrel for the first time since early June on Monday. Brent has risen roughly 16% over the past week. West Texas Intermediate, the US benchmark, is up around $12 a barrel this month.
High pump prices are a headache for President Donald Trump and the Republican Party ahead of midterm elections in November.
“As the U.S. military degrades the terrorist Iranian regime’s ability to attack commercial vessels and disrupt the free flow of energy through the Strait of Hormuz, oil and gas prices will plummet back to pre-conflict levels,” said Taylor Rogers, a White House spokesperson, in response to gas again being above $4.
“President Trump remains committed to unleashing American energy dominance, cutting costs, and putting more money back in the pockets of hardworking American families,” Rogers added.
Still, experts say it is likely to take months, if not longer, for gas to get back to the $2.98 national average from before the war.
Gas prices typically fall much slower than they go up. Most gas stations are small businesses that set prices based on their costs, such as the price of wholesale gasoline. Most operate on very thin margins, and those profits are squeezed when prices go up. So, they are slow to cut prices even when wholesale prices decline.
Still, about half of America’s states have an average price below $4 a gallon. Indiana has the lowest average price at $3.35 a gallon, while California is the most expensive at $5.49. Washington state and Hawaii also have an average price above $5 a gallon, according to AAA.
Gas prices are not expected to decline anytime soon, according to Tom Kloza, an independent oil analyst and advisor to Gulf Oil. The recent run-up in gasoline futures indicates prices will rise another 10 to 25 cents over the next week.
“That’s baked in,” he said.
The war with Iran and renewed closure of the strait aren’t the only factors driving prices higher. There’s also Ukraine’s recent drone attacks on Russian refineries, Kloza said.
“Russia has had to import gasoline, whereas they’ve been a net seller for many, many years,” he said. “It has raised fears in markets of a refined product shortage. And no matter how much gasoline we make here, it is a global market.”
All of this comes amid peak driving season in the United States, where demand for gas is at a maximum, Kloza said. Stronger demand is expected to keep upward pressure on gas prices through Labor Day.
The-CNN-Wire
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