U.S. Retail Gas Prices Down for Three Weeks Straight

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Written by Daniel Graeber for IIR News Intelligence (Sugar Land, Texas)

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Summary

Retail gasoline prices in the United States are a major factor behind recent spikes in inflation. Few U.S. refineries are offline, however, and markets are starting to fall.

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$4.10 per Gallon No Bargain, But Better than Last Month

Though U.S. retail gasoline prices would normally be elevated due to summer demand, and with tensions still in the Middle East, the market has notched declines for three straight weeks, travel club AAA reported.

IIR Energy reported Thursday that Citgo Petroleum Corporation suffered an unspecified mechanical issue that forced it to close down parts of its Corpus Christi Refinery-East plant that can process around 165,000 barrels per day (bpd). The facility should be back online by the weekend, though the American Automobile Association (AAA) showed regional gas prices are about 10 cents per gallon higher than the Texas state average of $3.56 per gallon for Friday.

Nationally, consumers are paying $4.10 per gallon on average. A month ago, the price at the pump was closer to $4.50, but AAA said the market has notched declines for three weeks in a row.

"Gas prices typically peak around this time of year, but uncertainty surrounding the Strait of Hormuz makes this year more unpredictable," the auto club stated.

IIR Energy showed that, apart from Corpus Christi, the U.S. refinery sector is functioning as expected for this time of year, offering more respite from higher prices at the pump. In three of the five Petroleum Administration for Defense Districts, there were no refinery issues at all.

Markets elsewhere are in retreat. After calling off yet another attack, U.S. President Donald Trump is now hinting that a breakthrough with Iran could materialize during the weekend. Esmaeil Baghaei, a spokesperson for the Iranian Foreign Ministry, was quoted by the semi-official Tasmin news agency as saying major parts of an agreement have indeed been finalized.

"The problem is that the contradictory positions of the United States have always caused turbulence and disruption in this process," he said.

The price for Brent crude oil, the global benchmark, was trading at around $88 per barrel early Friday. It had traded above $115 per barrel during the height of the conflict, and U.S. consumers were paying around $4.50 per gallon a month ago.

Markets Lower, but It's a Marathon

Even though energy prices are trending lower, there may be a lag time for a spillover to other markets. Food prices, for example, are contingent on fertilizers, which are derived from the fossil fuels trapped behind the Strait of Hormuz.

Ole Hanson, the head of commodity strategy at Saxo Bank in Denmark, said Brent crude in the 2027 contract is trading at around $78 per barrel, 18% higher than it was before the start of fighting in late February. That, on top of depleted global inventories, will continue to weigh on the market over the long term.

"For now, traders appear focused on the immediate implications of a reopening (the Strait of Hormuz) rather than the longer-term challenges that remain," he wrote in a Friday newsletter.

In the United States, the world's leading economy, energy stockpiles are depleted. The Energy Department reported that U.S. crude oil inventories are 5% below the five-year average for this time of year and gasoline inventories are down 6% from the five-year average.

Meanwhile, the U.S. consumer seems unfazed. The total amount of refined petroleum products supplied over the last four-week period, a proxy for demand, increased by 3.5% from year-ago levels, when retail gasoline prices were closer to $3.12 per gallon nationally.

Yet the war has created a surge in inflation. On Thursday, the U.S. Bureau of Labor Statistics reported the Producer Price Index, a gauge of prices at the wholesale level, increased month-on-month to May by 1.1% and annually by 6.5%, the sharpest spike since November 2022.

Hanson at Saxo Bank said that while there are signs the conflict in the Middle East may be winding down, the timing of the El Nino weather system adds another layer of tension.

"Historically, El Niño has been associated with drought conditions across parts of Australia, Southeast Asia and southern Africa, regions critical for grain, sugar and other agricultural production," he wrote. "At the same time, heavier rainfall in parts of South America can disrupt transportation networks and potentially affect mining operations, including copper production in Chile and Peru."

By the Numbers

• $88 oil is a bargain, relatively speaking
• 18% increase in long-dated Brent compared to pre-war levels

Key Takeaways

• Energy metrics down, but inflation lingers
• Iran doubts U.S. sincerity on peace negotiations

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