The recent ceasefire between the US and Iran has led to a significant drop in crude oil futures, with West Texas Intermediate falling 16% to below $95 a barrel. However, American drivers are unlikely to see immediate relief at the gas pump.
Wholesale gasoline futures dropped 10%, but analysts caution that the reduction in prices at local gas stations will be delayed.
'It typically takes a couple of weeks for crude oil to be refined into gasoline and delivered to gas stations,'explained Saxo Strategy Team. Many stations also purchase fuel in advance, meaning they are still selling higher-priced inventory.
Supply Chain Disruptions Persist
The closure of the Strait of Hormuz, a critical shipping route for global oil, has disrupted the energy supply chain. While the ceasefire promises to reopen the strait, rebuilding refining capacity and restoring shipping operations could take months.
'Damage to oil-and-gas facilities across the Gulf has curbed refining capacity, and it could take years for supply to return to pre-conflict levels,'said Susannah Streeter, chief investment strategist at Wealth Club.
Additionally, Iran is reportedly charging ships to pass through the strait, which could further increase costs passed on to consumers. With crude prices still 60% higher than at the start of the year, gas prices are expected to remain elevated, directly impacting American households and businesses.