Despite the decline in crude oil prices, U.S. gasoline prices are unlikely to fall back to pre-war levels quickly.
2026-06-23 11:14:08
The recent progress in US-Iran diplomatic negotiations has led to a decline in international oil prices and gasoline prices across the US, effectively easing the cost pressure on consumers. However, this round of oil price drops is merely a correction from the post-crisis highs, and does not indicate a complete return to normalcy in the market.
Constrained by multiple factors such as the lag in physical crude oil circulation, low global crude oil inventories, and supply-demand imbalance, gasoline prices are unlikely to fall back to pre-conflict levels quickly, and the pace of price reductions will be slow and volatile in the future.
The conflict with Iran and the disruption of shipping in the Strait of Hormuz triggered a global energy supply crisis, driving up gasoline prices across the United States. Before the conflict, the average price of gasoline in the US was less than $3 per gallon, but it had already exceeded $4 per gallon this spring. For the past three months, the market has been under constant pressure from high oil prices, with gasoline prices consistently more than $1 per gallon higher than before the conflict. Multiple factors, including disruptions to the refining system, rising crude oil prices, and seasonal increases in fuel demand, have collectively pushed up end-user fuel costs.
Gasoline prices have recently fallen from $4.50 to $4.05 per gallon, which has eased household expenses to some extent and reduced market inflationary pressures, but overall prices remain high.
The market generally believes that the energy crisis has subsided due to short-term price reductions, but this is a misconception. The decline in oil prices from their peak does not mean that they can quickly recover to pre-conflict parity levels.
The crude oil futures market is highly forward-looking and extremely sensitive to geopolitical news. Positive news such as diplomatic breakthroughs between the US and Iran and expectations of navigation in the Strait of Hormuz are quickly priced into the market, driving down Brent crude oil futures prices. However, the adjustment pace of the physical crude oil market lags far behind that of the financial market.
As a vital global energy chokepoint, the months-long shipping standstill in the Strait of Hormuz has triggered a series of problems that cannot be quickly resolved through diplomatic agreements. The rescheduling of backlogged oil tankers, the reassessment of shipping insurance risks, the easing of port congestion, and the adjustment of crude oil procurement structures by refineries all require lengthy recovery periods. Even if shipping gradually resumes, the efficiency of crude oil logistics will struggle to recover quickly, and coupled with tight spot crude oil supply, this directly limits the speed at which gasoline prices can fall.
During geopolitical conflicts, global commercial crude oil inventories and strategic reserves have been continuously depleted, resulting in global crude oil inventories remaining at multi-year lows. In particular, the US Strategic Petroleum Reserve, after being depleted by the Russia-Ukraine conflict, has been further reduced by the current energy crisis, and its current inventory level has fallen to its lowest level since 1983.
With geopolitical risks easing, countries and energy companies worldwide have a strong demand for restocking to prepare for potential future geopolitical fluctuations. While the resumption of navigation in the Strait of Hormuz will increase crude oil supply, the additional demand generated by large-scale restocking will offset the increase in market supply, making it difficult to create a situation of crude oil oversupply. Instead, it provides a solid floor for oil prices, preventing a significant drop in gasoline prices.
Crude oil prices are a core factor influencing gasoline prices, but not the only one. Refining costs, logistics and distribution expenses, fuel taxes, seasonal adjustments to fuel specifications, regional supply and demand differences, and local inventory levels all affect the trend of gasoline prices at the retail level.
When crude oil prices rise, gasoline prices quickly follow suit; however, during periods of declining crude oil prices, the pace of gasoline price reductions slows significantly due to tight refining capacity and increased demand during the summer travel season. Currently, it is the peak season for fuel demand, further delaying the return of oil prices to normal levels.
The market has already fully priced in various positive factors, such as the US-Iran reconciliation and the resumption of shipping, anticipating a rapid recovery in the energy market and a continued easing of inflationary pressures. However, this optimistic scenario is subject to many uncertainties. Delays in the implementation of the agreement, uneven progress in execution, high shipping insurance costs, and countries rushing to replenish their stocks could all disrupt the pace of oil price declines.
The market sentiment has shifted from panic to optimism much faster than the physical energy supply chain has been able to recover.
In conclusion, the current decline in gasoline prices has substantial positive implications, with the easing of geopolitical tensions providing a foundation for cooling the energy market. However, low inventory levels, rigid restocking demand, delayed logistical recovery, and the complex pricing mechanism for refined oil products collectively constitute the core barriers to further price declines. A rapid and significant drop in oil prices is unlikely in the short term; instead, gasoline prices will gradually recover through fluctuations, returning to pre-conflict levels—a process that will far exceed market expectations.
Constrained by multiple factors such as the lag in physical crude oil circulation, low global crude oil inventories, and supply-demand imbalance, gasoline prices are unlikely to fall back to pre-conflict levels quickly, and the pace of price reductions will be slow and volatile in the future.
Oil prices have fallen from their highs, but the overall price level remains significantly high.
The conflict with Iran and the disruption of shipping in the Strait of Hormuz triggered a global energy supply crisis, driving up gasoline prices across the United States. Before the conflict, the average price of gasoline in the US was less than $3 per gallon, but it had already exceeded $4 per gallon this spring. For the past three months, the market has been under constant pressure from high oil prices, with gasoline prices consistently more than $1 per gallon higher than before the conflict. Multiple factors, including disruptions to the refining system, rising crude oil prices, and seasonal increases in fuel demand, have collectively pushed up end-user fuel costs.
Gasoline prices have recently fallen from $4.50 to $4.05 per gallon, which has eased household expenses to some extent and reduced market inflationary pressures, but overall prices remain high.
The market generally believes that the energy crisis has subsided due to short-term price reductions, but this is a misconception. The decline in oil prices from their peak does not mean that they can quickly recover to pre-conflict parity levels.
The mismatch between the futures and spot markets and the lag in physical logistics have constrained the pace of price reductions.
The crude oil futures market is highly forward-looking and extremely sensitive to geopolitical news. Positive news such as diplomatic breakthroughs between the US and Iran and expectations of navigation in the Strait of Hormuz are quickly priced into the market, driving down Brent crude oil futures prices. However, the adjustment pace of the physical crude oil market lags far behind that of the financial market.
As a vital global energy chokepoint, the months-long shipping standstill in the Strait of Hormuz has triggered a series of problems that cannot be quickly resolved through diplomatic agreements. The rescheduling of backlogged oil tankers, the reassessment of shipping insurance risks, the easing of port congestion, and the adjustment of crude oil procurement structures by refineries all require lengthy recovery periods. Even if shipping gradually resumes, the efficiency of crude oil logistics will struggle to recover quickly, and coupled with tight spot crude oil supply, this directly limits the speed at which gasoline prices can fall.
Global inventories remain low, and restocking demand is providing strong support for oil prices.
During geopolitical conflicts, global commercial crude oil inventories and strategic reserves have been continuously depleted, resulting in global crude oil inventories remaining at multi-year lows. In particular, the US Strategic Petroleum Reserve, after being depleted by the Russia-Ukraine conflict, has been further reduced by the current energy crisis, and its current inventory level has fallen to its lowest level since 1983.
With geopolitical risks easing, countries and energy companies worldwide have a strong demand for restocking to prepare for potential future geopolitical fluctuations. While the resumption of navigation in the Strait of Hormuz will increase crude oil supply, the additional demand generated by large-scale restocking will offset the increase in market supply, making it difficult to create a situation of crude oil oversupply. Instead, it provides a solid floor for oil prices, preventing a significant drop in gasoline prices.
The pricing mechanism is complex, and gasoline prices are not linked to crude oil prices.
Crude oil prices are a core factor influencing gasoline prices, but not the only one. Refining costs, logistics and distribution expenses, fuel taxes, seasonal adjustments to fuel specifications, regional supply and demand differences, and local inventory levels all affect the trend of gasoline prices at the retail level.
When crude oil prices rise, gasoline prices quickly follow suit; however, during periods of declining crude oil prices, the pace of gasoline price reductions slows significantly due to tight refining capacity and increased demand during the summer travel season. Currently, it is the peak season for fuel demand, further delaying the return of oil prices to normal levels.
Market expectations for positive developments have been overvalued, and there are many uncertainties surrounding the subsequent recovery.
The market has already fully priced in various positive factors, such as the US-Iran reconciliation and the resumption of shipping, anticipating a rapid recovery in the energy market and a continued easing of inflationary pressures. However, this optimistic scenario is subject to many uncertainties. Delays in the implementation of the agreement, uneven progress in execution, high shipping insurance costs, and countries rushing to replenish their stocks could all disrupt the pace of oil price declines.
The market sentiment has shifted from panic to optimism much faster than the physical energy supply chain has been able to recover.
Summarize
In conclusion, the current decline in gasoline prices has substantial positive implications, with the easing of geopolitical tensions providing a foundation for cooling the energy market. However, low inventory levels, rigid restocking demand, delayed logistical recovery, and the complex pricing mechanism for refined oil products collectively constitute the core barriers to further price declines. A rapid and significant drop in oil prices is unlikely in the short term; instead, gasoline prices will gradually recover through fluctuations, returning to pre-conflict levels—a process that will far exceed market expectations.
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