“The big oil companies are not dropping their price at the pump commensurate with the sharply lower prices they are paying for oil,” said the President. “Those prices are dropping like a rock! In other words, customers are being ‘gouged.’”
When asked for comment, a DOJ spokesperson told TIME: “The price of fuel is not only [a] national security issue, it impacts the wallet of every American. We will always commit to ensuring affordability in this nation.”
Upon the signing of the 14-point memorandum of understanding (MoU) between the United States and Iran last week, gas prices began to fall.
But the current cost is still higher than the $65 price tag in February, before the start of the conflict.
“President Trump was clear all along that there would be short-term, temporary disruptions to energy markets, and that oil and gas prices will quickly fall as soon as the Iran situation is resolved,” White House spokesperson Taylor Rogers told TIME.
Since the signing of the agreement, Trump has made falling oil prices a key part of his message ahead of the November midterm elections.
But experts say it may be some time before gas prices for consumers show a significant drop.
Why gas prices may not return to pre-war levels soon
Michael Noel, a professor of economics at Texas Tech University, tells TIME the pace of the recent decline in gasoline prices is largely normal.
A major reason behind this is the complexity of the global supply chain and the time it takes for crude oil to move from production sites to refineries and eventually to consumers.
As a result, Noel argues the pace at which gasoline prices are falling reflects the mechanics of the energy market rather than showing evidence of price gouging.
The agreement signed last week secured an extended 60-day cease-fire that allows time for further negotiations to take place. But Noel says the uncertainty surrounding how those additional talks might progress is another risk factor to consider.
“Until the markets are certain that this is really over, then we should not expect to see crude prices go back to where they were, because they're always going to price in a probability that this is all just talk and we go straight back to war again,” he says.
Noel also points to what economists refer to as the “rockets and feathers” effect, where gasoline and diesel prices rise rapidly when crude oil prices increase, but fall more slowly when crude prices decline.
Still, Noel expects gasoline prices to continue to lower in the coming weeks, providing the U.S.-Iran cease-fire remains in place, but warns of other market forces that can shape oil prices.
Additionally, he points out that several countries, including the U.S., have drawn out their strategic petroleum reserves, and in order to replenish, may begin to buy up oil out of the market, which would increase demand.
He said last week oil reserves would have run out "in about four weeks,” if the war had continued.
“There are reserves all over the world. And we would really run out and there'll be a time when you wouldn't be able to get it,” he told reporters at the close of the G7 summit in France.
According to the U.S. Energy and Information Administration, the current crude oil in strategic petroleum reserves is at its lowest since 1983.
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