Gas prices fell below $4 per gallon, reaching a national average of $3.99 on Thursday, giving Americans critical relief just as the summer driving season begins.
The news is likely to be welcomed by Americans who watched prices at the pump climb to a national average above $4.50 per gallon only one month ago, per AAA, in the depths of the Iran conflict. Diesel prices surged even higher, crossing past $5.60 one month ago
"National average prices … should head toward $3.70/gal now that a deal with Iran has been signed — and seeing movements resume in the Strait [of Hormuz]," GasBuddy's Patrick de Haan said Thursday. "Good news for motorists. Diesel will soon fall below $5/gal as well."
Gas prices at some Michigan stations were over $5 for regular and nearly $7 for diesel in May. (Jim West/UCG/Universal Images Group via Getty Images) · UCG via Getty Images
Prices have surged over the past three months as crude oil prices reached multiyear highs, squeezed by the shuttering of the Strait of Hormuz, taking more than 1 billion barrels of oil off the global market. Crude derivatives, such as gasoline (RB=F) and fuel oil, have refining costs embedded in their price and are typically stored in smaller amounts, leading to tighter squeezes and larger price swings.
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Crude oil prices have plunged since President Trump's Sunday announcement that Washington and Tehran have agreed to terms for a 60-day memorandum of understanding that seeks to end the conflict, now in its third month, and reopen the Strait of Hormuz for commercial passage.
Prices on Brent crude (BZ=F), the international benchmark, have fallen roughly 13% over the past five trading sessions, putting them firmly below $80 per barrel for the first time since the early days of the war. Contracts on US benchmark WTI crude (CL=F) have shed a stronger 15% to trade below $75.
That said, gasoline prices still remain elevated above prewar levels. White House press secretary Karoline Leavitt said earlier in the war that prices would "drop rapidly, potentially even lower than they were prior to the start of the operation."
However, the White House may remain at the whim of a phenomenon the Federal Reserve Bank of St. Louis calls "rockets and feathers" — where prices on crude and gasoline often rise quickly together, but gasoline comes back down at a slower pace.
Credit card data throughout the past months has shown that US consumers were spending an increasing amount on gasoline and reducing costs in other areas, per Bank of America.
Read more: Find the best credit cards for buying gas
"Drivers will take all the relief they can get as they embark on summer road trips," said AAA, which tracks national gasoline price data.