US fuel prices to take 'months' to normalise after US-Iran deal to end war
Following a preliminary deal to end the US-Israel war on Iran, oil prices have fallen, but experts warn that US consumers may wait months for significant relief at the pump due to supply chain bottlenecks and the time needed for recovery.
The preliminary agreement to end the US-Israel military campaign against Iran has sent oil prices tumbling to a three-month low, but experts caution that American drivers may have to wait months before seeing substantial relief at the petrol station.
The closure of the Strait of Hormuz—a strategic chokepoint through which roughly one-fifth of the world's oil and liquefied natural gas normally passes—disrupted global energy markets for more than three months. US President Donald Trump said prices would 'drop like a rock' once the strait reopens, but analysts are sceptical.
On Monday, US petrol prices averaged $4.06 per gallon, down from a high of $4.48 in early May but still well above the pre-war level of $2.98 on February 28. According to the Bureau of Labor Statistics, energy prices rose 7.7% over the last two months alone and are up 40% from a year ago.
Supply chain strains
Even if the ceasefire holds, it may take many months or beyond a year for global oil inventories to recover to pre-war levels, said Patrick De Haan of GasBuddy. He expects consumers may not see pre-war gas prices until 2027.
During the war, oil production slumped, with more than 14 million barrels per day (14% of global demand) shut in. Port bottlenecks pose another hurdle: over 500 ships are awaiting passage, and it will take weeks for them to reach destinations and unload. Major shipping firms like Wallenius Wilhelmsen and Maersk have not altered their Middle East operations.
US strategic petroleum reserves have fallen to their lowest since 1983, down 18% since the war began. Summer travel season will boost jet fuel demand, with United Airlines CEO Scott Kirby warning of fare increases up to 20%.
Impact on food prices
Rising fuel costs are also hitting food budgets. US inflation ticked up 4.2% year-over-year. Tomato prices have surged 40%, lettuce prices rose 16% in May, and ground beef is up about 12%. Rice University political science professor Mark Jones warned that food prices may not return to pre-war levels, as retailers could keep them elevated, echoing patterns seen during the COVID-19 pandemic.
