- US national average gasoline prices dipped to $3.999 per gallon on Thursday — the first sub-$4 reading since March — as the US-Iran MOU signing and declining crude oil prices took effect.
- Prices have retreated from a May peak above $4.50/gallon on the back of record US oil exports, weaker-than-expected Chinese demand, and a trickle of Hormuz shipments resuming, pushing Brent crude below $80/barrel.
- Gasoline stockpiles are at their lowest seasonal level in over a decade, and experts say prices won’t return to pre-war levels until at least 2027, with the pace of inventory replenishment the key variable to watch.
- The White House has used a range of policy levers to contain prices — including Jones Act waivers and Strategic Petroleum Reserve drawdowns — and views falling pump prices as a critical political win ahead of November midterms.
What Happened?
National average regular unleaded gasoline fell to $3.999 per gallon on Thursday, according to the American Automobile Association — crossing below the $4 threshold for the first time since March. The drop follows the US-Iran MOU signing at Versailles, which markets read as a signal that Hormuz will reopen and global oil flows will normalize over time. Brent crude fell 1.9% to $78.10/barrel, down sharply from the ~$95 level seen just last week when Trump first signaled a deal was imminent. Record US crude exports and a sharper-than-expected slowdown in Chinese demand have also weighed on prices.
Why It Matters?
With many Americans dependent on cars for daily necessities, the months-long price spike above $4.50/gallon — peaking during the Hormuz closure — squeezed household budgets and fed directly into CPI shelter and transportation inflation. Lower pump prices represent a major political win for the White House as it heads into midterm election season, with Democrats having repeatedly hammered Republicans on gas prices. However, gasoline inventories are at their lowest seasonal level in more than a decade, meaning the supply buffer for any renewed disruption is thin — and a sustained return to pre-war price levels likely requires months of uninterrupted Hormuz shipping.
What’s Next?
The pace of inventory rebuild will be the primary driver of near-term pump prices. Energy traders say it will take months — possibly into 2027 — before global oil supply fully normalizes after the Hormuz disruption. Key risks include uncertainty about Iran’s passage terms, unresolved questions about mine clearance in the strait, and the durability of the 60-day ceasefire framework. The White House is expected to keep the Jones Act waiver in place and maintain flexibility on SPR drawdowns as a political hedge against any price reversal heading into November.
Source: Bloomberg
