Everyone now has a stake in an early end to the Iran war.
The dramatic Democratic victory in the U.S. midterm elections could well change the dynamics of what everyone pays at the gas pump.
In other words: How would you like to see the national average price of gasoline falling under $4 a gallon in, say, the next week or so?
It’s possible, two analysts said on Nov. 4.
Read more: Bank of America has unexpected verdict on AI stocks after post-midterm Democrat sweep
A slump that’s “not normal”
You could see pressures in action immediately in oil markets on Nov. 4, the day after the election. Light sweet crude, the U.S. benchmark, fell 8.3% to $88.12 per 42-gallon barrel in New York. Brent crude, the global benchmark, dropped 8.7% to $94.62 a barrel.
Unleaded gasoline futures fell 21 cents to $2.73 a gallon in New York. How to characterize that decline? “It’s not normal to see a price decline like that,” said Tom Kloza, chief energy advisor for Gulf Oil.
And just as unusual is to see futures prices in diesel fall 32 cents per gallon. The diesel settled at $4.201 a gallon, down 33 cents, or 7.2%, he added.
U.S. gasoline prices were hovering around $4.11 a gallon on Nov. 4, down 1% on the day and 6% in the last week alone. Since peaking at $4.66 a gallon in late May, U.S. retail prices are down nearly 12%.
And there’s little to stop the decline until oil companies wrap up seasonal refinery maintenance and begin switching production over for the 2027 summer driving season.
Patrick De Haan, head of petroleum analysis at GasBuddy.com, thinks the average could drop below $4 a gallon in seven-to-10 days. Diesel could drop under $6 a gallon by Thanksgiving, he said on Twitter.
And states that traditionally don’t heavily tax gasoline or diesel prices could easily see gas prices at $3 or even lower, Kloza added.
How a big sell-off was set up
How can this happen?
Here’s why, wrote analysts at JPMorgan in a note published on Nov. 4: “For all the disruption to global oil supply chains — from production and refining to shipping and trade — the oil market has arrived at a remarkable destination: a surplus.”
The surplus is the result of:
- Recovering Middle Eastern flows. In March, after the U.S. and Israel opened their war against Iran, countries along the Persian Gulf have figured out ways to get their crude into the global market. From a low of 9.8 million barrels a day, exports are back to 20 million barrels a day (though still off 16% or so from their daily exports before the war erupted.
- Rising crude-oil production elsewhere, especially from producing regions in Latin America. Combined, about 1.5 million barrels a day of oil from Brazil, Guyana and Argentina has found its way into global markets.
- Weak demand. Sharply higher oil and natural gas prices resulting from the war caused many users to limit their consumption.
Preparing for action in the Persian Gulf.
The war could erupt again
Lower oil and gas prices look like a good bet, but the wild card in the equation is whether the war is about to end.
Unknown is if the Trump Administration, Israel or, for that matter, Iran wants to end the war. A resumption would almost certainly push oil prices higher.
Iran’s government appears to believe the Democratic victory in the Nov. 3 election means Iran won the war.
But no settlement has been reached, particularly over Iran’s nuclear capabilities.
President Trump’s term runs until January 2029, and he is still commander in chief, and Israeli Prime Minister Benjamin Netanyahu may be able to form a new government.
More on oil and economy:
- Exxon now makes more turning oil into diesel than pumping it
- Stocks surge despite a hidden warning sign that traders can’t ignore
- World’s biggest oil CEO shares stark oil price warning as pressure builds and supplies run dry
Energy stocks slide with oil prices
This is maybe great news for consumers. But it was not great for oil companies and their investors.
The oil-price selling slammed stocks of oil companies on Nov. 4, with ExxonMobil (XOM) down 4.6% to $169.71. The shares are now off 10% since hitting a 52-week high of $188.50 only five days ago, on Oct. 30.
Chevron (CVX) fell 3.8% to $216.80. ConocoPhillips (COP) dropped 5.9% to $135.87.
The U.S. market overall was up substantially after the midterm elections. The Dow Jones Industrial Average jumped 1,569 points to 53,356, up 3% on the day. The 1,569-point gain was the 5th largest for the index.
Related: Exxon, Chevron paint bullish pictures of the oil business
