Gas prices are expected to remain above $4 a gallon through the upcoming midterm elections in early November, according to analysts, as global conflicts continue to impact oil supply and transportation.
The national average price for a gallon of gasoline currently stands at $4.27, an increase of nearly $1.30, or 43%, since February, AAA data shows. Analysts point to the ongoing fighting in the Middle East and the war in Ukraine as primary drivers for the elevated costs. These conflicts have damaged oil infrastructure and disrupted fuel exports from Russia, contributing to a global supply shortage.
Tom Seng, a professor of energy finance at Texas Christian University, noted the current geopolitical climate is not conducive to falling energy prices. Patrick De Haan, GasBuddy Petroleum Analyst, stated that prices are unlikely to fall below the $4 per gallon threshold before the midterms.
The Brent crude futures price, a global benchmark for oil trading, has recently climbed above $112 a barrel, a level not seen since May. This rise is attributed to reported attacks on energy infrastructure in the Middle East. The Islamic Revolutionary Guard Corps Navy claimed responsibility for attacks on several vessels in the Strait of Hormuz, accusing them of navigating an illegal route and transferring oil. These incidents followed claims by Yemen-based Houthi militants of strikes on Saudi Arabian energy facilities.
Despite some improvements in crude oil exports from the region, increased transportation costs and damaged refinery infrastructure are impacting the supply of refined products necessary for gasoline. Denton Cinquegrana, chief oil analyst at Dow Jones Energy, explained that while crude oil might be moving, the supply of refined products is constrained, affecting prices globally.
Even if conflicts were to resolve, analysts caution that a significant drop in gas prices would likely lag. Repairs to damaged oil infrastructure would take time, and retailers might maintain higher prices as they sell through existing inventory purchased at higher costs. Ramanan Krishnamoorti, a professor of petroleum engineering at the University of Houston, noted that gas prices typically decline slowly.
However, some analysts suggest there are factors that could eventually lead to lower prices. Seasonal trends often see a decrease in demand during the fall as summer travel concludes. Additionally, refineries are transitioning to a less expensive blend of winter fuel, which is subject to fewer environmental regulations. Cinquegrana acknowledged that demand typically decreases at this time of year due to seasonality.
Despite these potential moderating factors, the current supply shortage is expected to keep gas prices above $4 a gallon in the coming weeks. Cinquegrana responded with a concise "No" when asked if U.S. gas prices could fall below that benchmark by Election Day.