U.S. gas prices fell below $4 a gallon on average Thursday, but just barely.
It is the first time since March that the average cost for a regular gallon has been that low. Prices fell overnight after President Donald Trump signed an agreement with Iran that calls for Tehran to dilute its stockpile of highly enriched uranium and waives U.S.-backed sanctions on the country.
Gas prices are at $3.999 on average in the U.S., according to motor club AAA. The drop below $4 follows a 15% decline in the price of U.S. crude this month.
But fluctuations in gas prices remain across the country. In California, gas prices are averaging $5.64 per gallon, while in South Carolina it’s $3.58 per gallon.
The agreement between the U.S. and Iran calls for a permanent end to hostilities and starts a 60-day negotiating clock to reach a final deal on the future of Iran’s nuclear program, though Trump left the door open to resume attacks. It appears to offer Iran several benefits up front while extracting little in return.
Oil prices fell Monday to about $80 for a barrel of U.S. benchmark crude. That compares to $67 per barrel before the war and the price of over $120 a barrel reached earlier in the conflict.
Even as gas prices start to decline, it is anticipated to take weeks or months for oil to start flowing through the Strait of Hormuz again.
Before the war, the strait carried a fifth of the world’s crude oil. Now, it will take time for hundreds of ships trapped in the Persian Gulf to exit through the narrow strait. And Gulf oil producers that throttled back production will need time to get the oil moving again. Analysts also say ship captains may take their time to decide if passage is safe and that the threat of attack from Iran has truly receded.
In addition, refineries typically pay for crude oil a month or more in advance, so even after oil prices drop, they won’t immediately be processing cheaper products.
Fighting over the Strait of Hormuz disrupted not only supplies of crude and refined fuel but also the supply chains for fertilizer, food and even footwear. Businesses expect higher costs to linger, which means their customers might need to prepare for that too.