Former President Donald Trump has publicly voiced frustration that U.S. gasoline prices are not declining quickly enough to reflect a drop in oil prices. He has called for the Justice Department to investigate whether oil companies are "gouging" consumers.
Trump stated on social media that "The big Oil Companies are not dropping their price at the pump commensurate with the sharply lower prices they are paying for Oil," and warned, "Gasoline prices better start going down a lot faster than what I’m seeing!"
Experts, however, explain that the relationship between crude oil costs and retail gasoline prices is complex and not immediate. Crude oil is the primary component of gasoline, but its cost is only one part of the final price consumers see at the pump. According to the Energy Information Administration, oil prices accounted for about 51% of the price of a gallon of gasoline last year. Federal and state taxes contributed roughly 17%, refining costs and profits 14%, and distribution and marketing the remaining 17%.
Factors Affecting Pump Prices
Gas station owners, not oil companies, set retail prices. When crude oil prices surge, such as during periods of geopolitical instability like the recent conflict involving Iran, gas station owners typically must raise their prices. Conversely, even after crude oil prices fall, it can take weeks or longer for these reductions to filter through the supply chain to refineries and then to consumers.
Rob Smith, director of global fuel retail at S&P Global Energy, noted that during the recent conflict, the price of Brent crude oil rose about $1.75 per gallon, while the average U.S. gasoline price increased by $1.10 per gallon during the same period. He suggested that retailers absorbed some of the cost increase, and are now recouping those losses as oil prices fall, emphasizing that "retailers need to keep the lights on" and that small businesses, which own the majority of gas stations, have limited room for error.
Historically, U.S. gas prices also tend to increase seasonally. Warmer weather leads to a switch to more expensive summer blend fuels, and increased demand for travel, such as during the upcoming July Fourth holiday, can further influence prices.
Supply Chain Lags and Market Volatility
Refineries purchase crude oil in advance, and the time it takes for deliveries and processing means they may still be using more expensive oil supplies weeks or months after market prices have dropped. The gasoline then travels through pipelines, ships, and trucks to reach filling stations, further delaying price adjustments for consumers.
Bethany Williams, spokesperson for the American Petroleum Institute, stated, "Gasoline prices don’t move in lockstep with crude oil, especially during a major global disruption that is still affecting supply, refining and inventories." Analysts caution that it could take months for supply chains to fully recover to pre-war levels, with some not expecting a complete rebound in Persian Gulf oil production until at least the first quarter of 2027.
The war and subsequent disruptions have had a broader economic impact, contributing to increased costs for various goods and services beyond gasoline. An analysis from Brown University's Watson School of International and Public Affairs estimates that higher fuel prices alone have cost American households an average of over $474 since the conflict began.