Gas prices fell to $3.99 on June 18 after U.S. and Iranian officials signed a memorandum of understanding aimed at ending the war between the two countries. Brent crude oil also fell below $78 per barrel the same day, and the drop came the morning after the agreement was signed.
Donald Trump said at the G7 Summit, “Now that the oil is coming down, you're going to see everything follow” and “Everything follows the cost of energy.” That national average for regular gasoline was down from $4.52 last month, but it remained above $3.19 at this time last year.
Patrick De Haan on June 17
Patrick De Haan, head of petroleum analysis at GasBuddy, said on X on the evening of June 17 that he hopes “flows will slowly return to normal” and that “the worst is behind us.” He also said in separate posts that he expects the national average price of gasoline to head toward $3.70 per gallon, and could fall below $3 per gallon later this year if everything goes well.
For summer travelers, the move comes after AAA projected 67.2 million Americans will travel at least 50 miles by car or plane for Fourth of July trips. A Lending Tree survey published on June 15 found that 75% of Americans said higher gas and airfare costs had already affected their summer travel plans.
Strait of Hormuz Shipping
Wayne Winegarden of the Pacific Research Institute said, “We're coming down from the highs, because with the memorandum of understanding, it looks like the Strait of Hormuz will be open faster than otherwise,” and added, “That's providing relief from where we were, but I think it's very important to recognize that that's different than getting back to where we were in January.” Oxford Economics analysts said the agreement between the U.S. and Iran is a significant step, but it will still take time for shipping in the Strait of Hormuz to approach pre-war levels.
Mike Skordeles of Truist said, “How wide is the channel is still an open debate, and that's probably going to take several more weeks to ensure that that's not a problem,” and added, “The U.S. Navy — not to say they're going to take more chances — but they're not as concerned as, and they're more sophisticated than, a plain Jane oil tanker from China.” The practical test is whether shipments move without the extra costs and delays that have kept fuel prices elevated since the war began on Feb. 28.
Consumer Sentiment and Prices
The University of Michigan said its measure of consumer sentiment rose 9.2% this month after hitting an all-time low in May, and Joanne Hsu said June's spike in sentiment was thanks to consumers experiencing some relief at the gas pump. That relief is real, but households planning Fourth of July travel are still paying more than they did a year ago, so the next few weeks will show whether lower oil prices reach drivers quickly enough to hold.
