“the Strait of Hormuz hasn’t actually reopened yet — and there are serious doubts about what “reopening” means exactly (not to mention how long it might last).
…
Assuming the Strait of Hormuz does fully reopen sometime soon — a big assumption given all the diplomatic challenges ahead — experts say prices at the pump still won’t plunge to their prewar level.
“There’s an old expression: Gas prices go up like a rocket and come down like a feather,” one independent oil analyst told CNN.
In the case of Iran, five factors will continue to pad the price of gas even after the end of the war.
First, oil production has largely ground to a halt across the Persian Gulf over the past six weeks — partly because the region’s oil infrastructure suffered damage and partly because countries such as the United Arab Emirates, Kuwait, Iraq, Oman and Saudi Arabia (the world’s largest oil exporter) ran out of storage space. An estimated 7.5 million barrels of production per day were shut down in March, according to the U.S. Energy Information Administration. Global supply will continue to suffer while these countries play catch up — a process that could take years, experts say.
Second, exporting oil from the Gulf will get more expensive if Iran charges a toll, and that added cost — an estimated $1 per barrel, according to CNN — is likely to be passed on to consumers.
Third, insurance for ships that cross the Strait of Hormuz will likely cost more as well — another expense that could make gas and other petroleum products pricier for Americans.
Fourth, “traders will want some premium to compensate for [the] risk” that the “ceasefire breaks,” according to Zandi. That’s why oil futures are still above prewar levels through the end of 2026.
Finally, retail gas station owners set their prices based on the wholesale price of gas. When oil gets more expensive, that price goes up — but gas stations tend to accept a smaller profit margin on each gallon they sell in order to stay competitive. Then, when the cost of oil starts to fall, they typically try to even things out by hanging onto higher gas prices for as long as possible.”
The Iran war has been great for Russia so far. It’s oil is worth more thanks to the war. Some sanctions on its oil have been lifted by Trump as he tries to lower gas prices. The many munitions used by the US in the war mean there are fewer for the Europeans to buy for Ukraine. It allows Russia and China to go around the world saying how evil the US is, unjustly attacking a global south country.
“While speaking to reporters in the Oval Office on Friday, President Donald Trump claimed that “every price is down,” including those paid at the pump. Gas is now “almost $2,” he added.
Gas is not $2 a gallon. The national average is a little over $3 a gallon, about the same as it was a year ago, according to AAA. Even if you’re giving Trump wide leeway for that “almost,” this is what would have been called a gaffe in more normal political times. Remember when President George H.W. Bush didn’t know the price of a gallon of milk?
When you zoom out to Trump’s larger point, things get even more confused. Despite Trump’s claim, prices as a whole continue to rise at politically inconvenient rates. Annualized inflation was 3 percent in September, the most recent month for which data is available. Prices for food and housing are rising faster than overall inflation. Most Americans say they are spending more on groceries now than a year ago.
…
This is the point where I’d normally point out that presidents don’t really exert much influence over prices. There is no “lower gas prices” button in the Oval Office. Yet while it’s true that market forces are the primary reason any price is what it is, this administration has taken a number of actions that directly and deliberately put upwards pressure on prices.”
“”Californians pay an additional 72.4 cents per gallon at the pump attributable to state and local taxes and fees, which is the highest in the nation,” according to the California Tax Foundation.”
…
“”the state’s cap-and-trade program affects gasoline prices because it requires fuel suppliers to purchase permits that cover the greenhouse gases emitted when the fuel is burned. We estimate that this currently adds 23 cents per gallon to the price of gasoline.””
…
“California has effectively walled its market off from fuel produced elsewhere. They write that, despite bordering other states from which fuel could theoretically flow to satisfy demand and lower prices, California policies have made the state an “island” because of “capacity constraints on California’s pipelines and the state’s stringent environmental fuel standards, which effectively require fuel to be refined in-state and limit the ability to import fuel from other regions.””
“The U.S. government has limited influence over those global prices, which are shaped by market and geopolitical factors. Gas prices dropped during the early months of the pandemic, for example, because millions of people stayed home and dramatically reduced their gas consumption. But as the Bureau of Labor Statistics documented, prices surged as society reopened and the economy started to rebound.
While energy prices have consistently been higher under Biden than they were during Trump’s first term, they have dropped from their heights in 2022, when Russia’s invasion of Ukraine sent global prices soaring. As the Agriculture Department noted in February, fuel and oil costs saw significant declines in 2023 and are expected to decline again in 2024, thanks to drops in global energy prices. U.S. oil prices in the past few days have dropped to their lowest level in two years as OPEC+ says it will increase its own oil production later this year and fuel demand in China looks weaker.
And it’s not clear green-lighting more domestic drilling would have much impact on energy costs. For one thing, the U.S. is already producing record amounts of oil and gas, not to mention renewable energy like solar, wind and hydropower. The Biden administration has also approved more permits to drill for oil on federal land than many of its predecessors, even as it moves to restrict how much federal land is available for drilling.
Several economists also told POLITICO that while energy costs are a factor in every part of the food supply chain, they’re just one of many inputs companies consider when setting prices.”
“The move to regulate fuel economy came about a few years earlier, following the 1973–74 Arab embargo that suddenly ended the flow of oil from OPEC nations. In the face of skyrocketing oil prices, Congress froze gasoline prices to protect American consumers from pocketbook shock. Then came the hard part. Elected officials sought to require U.S. automakers to build the smaller, more economical cars that unquestionably would have been built had gasoline prices been allowed to rise freely. Yet the fuel economy standards hit passenger sedans hard while leaving light trucks, which were not seen as passenger vehicles, almost untouched.
As the fuel economy standards began to bite consumers, they found that trucks provided comfort and safety no longer available in the downsized sedans. Truck sales surged, and in 1990, Ford placed a four-door body on a Ranger truck frame and introduced the Ford Explorer, a passenger vehicle that satisfied the government’s truck definition. This inspired an explosion of similar SUV production across the industry. Trucks became beautiful, expensive, and highly desirable.”
…
“All the while, the fuel economy standard for trucks remained less strict than for sedans. To make things even better for U.S. producers, almost-prohibitive tariffs on European light trucks were extended to the rest of the world. Many foreign producers eventually jumped the tariff wall and built trucks and cars here, but the home-grown industry enjoyed an early advantage.”
“President Biden still isn’t what you’d call popular, but he’s closer to popular than he’s been in some time. On Jan. 11, Biden hit a 44.1 percent approval rating in FiveThirtyEight’s average — his highest mark since October 2021. That was 3 percentage points higher than it was on Nov. 9, which isn’t a huge increase in the grand scheme of things, but in this polarized age where any movement in the president’s approval rating is rare, it’s a veritable Bidenaissance.
This is the part of the story where you expect me to explain why this is happening. Which is understandable, except it’s impossible to know for sure what’s behind this shift. One leading theory, though: It’s because inflation has been slowing down. Prices in December 2022 were just 6.5 percent higher than they were in December 2021, which was the lowest inflation rate in over a year. Gas prices, another highly visible metric of the strain on Americans’ wallets, also plummeted from an average of $3.80 per gallon in November to $3.32 per gallon in December. These seem like pretty compelling explanations, considering how closely Biden’s approval rating was tied to the inflation rate and gas prices last year.”
…
“But is Biden’s luck about to run out? The discovery of a handful of classified documents from the Penn Biden Center and Biden’s Delaware home has generated arguably the first bad news story for Biden in months, and it’s fair to wonder whether it will reverse — or at least halt — his miniature political comeback. The few polls that have been conducted since these revelations suggest that Americans think Biden acted badly, and that could be dragging down his approval rating.”
“More than half the gas stations in the country are single-store operations run by an individual or a family, according to the Association for Convenience and Fuel Retailing (NACS), a trade association representing the stores that sell more than 80 percent of the