President Trump said this week the war with Iran was basically done.
Oil prices fell quickly on the statement news. In fact, futures trading of Light Sweet crude oil, the benchmark U.S. crude oil, has seen the price fall nearly 12% from March 6 and nearly 33% its peak on March 9.
But did you expect the price of gasoline to start falling at your local station? Maybe yes. But, sadly, you would be wrong. Mostly because, despite the president’s optimism, the Iran conflict remains fluid.
The surprise of gas prices
The national average price of gasoline was still rising as of March 10, according to GasBuddy.com. GasBuddy put the national retail price at $3.57 a gallon, up from the prior day’s $3.541 and 25% from the December 31 price of $2.82.
It may take a little time before you see any relief because of news coming out of the Middle East.
Another reason: Retail gasoline dealers have had to change prices so quickly as they soared into March 9 that it takes time to trim.
Even then, don’t expect them to fall back to levels seen in early January, when GasBuddy data shows the U.S. national price bottom at about $2.74 per gallon.
Gas prices vary widely across the country. The low price in Dallas in early January was $2.23 gallon.
Typically, retail gas prices come down more slowly than when they go up. The same holds for crude prices.
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A surprise jolts oil markets
So, a lot of oil is just parked and not getting released to refiners around the world. That’s understandable given video and photos of damage from Iranian missiles and drones on countries around the Persian Gulf.
The fears of tanker attacks is so big that two events on March 10 prevented prices from dropping even further.
- Energy Secretary Chris Wright tweeted in the morning that U.S. Navy ships were excorting tankers through the Strait. The tweet was quickly delated, however.
- The reason: News outlets, including CBS News, reported U.S. intelligence reports indicated that Iran was getting ready to lay mines in the Strait.
The continuing worries about the Strait has surprised oil traders, investors, and, probably, the Trump Administration, said Patrick DeHaan, head of Petroleum Analysis at GasBuddy.com.
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A dramatic price drop
Still, the drop in oil prices in less than 48 hours is, frankly, dramatic.
Light sweet crude hit a 52-week high early Monday at $119.48 per 42-gallon barrel. It settled at $83.45 on March 10, down 12% in a day and down 30.2% from its 52-week high the DAY BEFORE. But the price jumped 8.8% in the last hour of trading.
Brent crude, the global benchmark, settled at $87.80 a barrel, down 11.3% on the day and off 26.5% from its peak a day earlier. But it, too, jumped in the last hour of March 10 trading and was still rising in after-hours trading.
If — and when — the war truly starts to wind down, the blockage should start to ease within a next few days, DeHaan said.
But slowly, others agree.
“Putting the risk genie fully back in the bottle may take a while,” Jonas Goltermann of London-based Capital Economics said in a note. “Even if there is a resolution to the war in relatively short order, some of its effects are likely to linger.”
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Energy shares drop
Energy shares were largely lower in a day that started with a continuation of Monday’s rally but then fell apart.
Energy Select Sector SPDR exchange-traded fund closed down 1.3% to $55.60. Exxon Mobil dropped 1.5% to $148.13. Chevron, which has been investing heavily in Iraq, fell 1.7% to $186.29, and ConocoPhillips slumped 2.5% to $114.15.
The Standard & Poor’s 500 Index, up as many as 48 points early in the day, closed down 14 points to 6,781. The Dow Jones Industrial Average saw a gain of 480-point gain devolve into a 34-point loss at 47,707.
Related: Morgan Stanley resets bets on defense stocks amid war
