After months of watching fuel prices climb, US drivers are getting a small break at the pump. The national average price of regular gasoline dipped below $4 a gallon on Thursday, a level not seen since the early weeks of the war, as easing oil prices brought some welcome relief.According to AAA, the national average price for a gallon of regular gas stood at $3.999 on Thursday.The decline comes as global crude benchmarks tumbled to near the $75 per barrel levels from the $126 per barrel peak seen amid the Middle East conflict. Now, the US and Iran have signed a tentative peace agreement which is set to resume oil shipments through the Strait of Hormuz.However, despite the drop, fuel prices remain significantly higher than before the war began on February 28. American motorists are still paying about $1 more per gallon than they were before the conflict, while gasoline costs are around 25% higher than at the same time last year.
Consumers still feeling the pinch
The increase in fuel costs has prompted many households to reassess spending and tighten their budgets. Research suggests that short-term fluctuations in petrol prices often influence consumer behaviour, affecting not only travel decisions but also broader household spending.Dylan Brewer, an assistant professor in Georgia Tech’s School of Economics, said rising fuel prices can lead some consumers to cut back even on essential purchases such as groceries.“If costs continue to fall in the coming weeks,” Brewer said, more people may be able to “loosen their belts a little bit.”He added that businesses dependent on petrol and diesel for transportation could also benefit from lower fuel costs, although it may take several months for those savings to move through supply chains.
Why prices are still not down?
Fuel is not the only expense that has risen during the war. Groceries, airline tickets, shoes and condoms have also become more expensive amid global supply chain disruptions.Even if oil and other key commodities, including fertiliser, begin flowing from the Middle East again, experts say higher prices are likely to persist beyond the end of the conflict.“Product prices across the United States are projected to keep climbing for the rest of 2026,” Pat Penfield, a professor of supply chain practice at Syracuse University, said Thursday.Penfield said inventories had been depleted and supply chains disrupted during the war. He noted that farmers faced higher costs for fertiliser and other inputs this spring, which would “ripple through to increased food prices by autumn.”He also said that limited refining capacity in the United States “remains a significant bottleneck” to further reductions in fuel prices.
Inflation pressures and regional price gaps
Higher fuel costs have already contributed to pushing US inflation to its highest level in three years, while many drivers continue to pay well above the national average at the pump.Prices vary considerably between states due to factors such as taxation and proximity to supply sources. On Thursday, California recorded the highest average price for regular gasoline at about $5.64 a gallon, followed by Hawaii at $5.57. By comparison, motorists in Indiana and Texas paid around $3.40 and $3.49 a gallon respectively.
Strait of Hormuz reopens, but recovery may take time
Maritime data from Lloyd’s List Intelligence showed that major shipowners have started moving vessels through the Strait of Hormuz following the signing of the memorandum of understanding on Wednesday, although some operators reported that only limited side routes were available.US Vice President JD Vance also said on Thursday that the US Navy had lifted its blockade to permit some transit to and from Iranian ports.However, analysts expect it could take weeks or even months for shipping activity to return to pre-war levels. Before the conflict, the Strait of Hormuz carried around one-fifth of the world’s crude oil, and Gulf producers that reduced output during the war will need time to restore production and exports.Shipping companies are also expected to proceed cautiously as they assess the safety of the route. The agreement between Washington and Tehran calls for a permanent end to hostilities and begins a 60-day negotiating period aimed at securing a final agreement on Iran’s nuclear programme, although Trump indicated that the option of renewed attacks remains open.In addition, refineries generally purchase crude oil several weeks in advance, meaning lower oil prices are unlikely to translate immediately into cheaper fuel products.The impact of higher energy costs has been particularly severe in countries that rely heavily on Middle Eastern imports, especially across Asia and Africa.
