Vice President JD Vance is on his way to Pakistan for talks with Iranian officials in Islamabad on Saturday. Amid a shaky ceasefire, Vance is hoping to make progress toward ending a war that has sent global oil prices skyrocketing over the last month.
But those hoping these negotiations will bring quick relief to consumers may want to temper their expectations. Despite the pause in hostilities, most analysts expect that gas prices will stay high for some time to come, driving up costs at the pump and across the economy.
The problem starts with the scale of the disruption to oil flows over the last month. Even if the talks lead to a durable peace deal and the full reopening of the Strait of Hormuz, it will take months or even years for global oil supplies to return to their pre-war levels. And, even if supplies return to normal, there tends to be a lag between drops in oil prices and gas prices. While sharp spikes in oil costs can push up gas prices within days, it usually takes a couple of weeks to feel drops in oil prices at the pump, as Pavel Molchanov of Raymond James told the New York Times. This helps explain why Americans are still paying more than $4 per gallon even as Brent crude prices have dropped by roughly 10% amid hopes for a lasting ceasefire.
Attempts to route oil flows around the Strait of Hormuz have also hit significant hurdles. Iranian attacks on Saudi Arabia’s East-West Pipeline, which pumps oil from the country’s east coast to ports on the Red Sea, have cut its capacity by 10%. “This is a logistics shock layered on top of a production shock,” Shohruh Zukhritdinov, a Dubai-based oil trader, told Reuters. “The market has lost its main workaround for the Strait of Hormuz.”
The strait, meanwhile, remains all but closed to traffic despite Tuesday’s ceasefire. Prior to the pause, a handful of tankers were still going through the Strait of Hormuz each day. But only six tankers passed through the waterway on Thursday, and none made the journey on Wednesday, according to data from Kpler, a maritime intelligence company. For shipping companies, the proposition of sending a ship through the strait remains fraught. Iranian officials say that there are still mines in the narrow waterway, and that tankers should coordinate with Iran in order to ensure safe passage. It remains unclear whether this coordination (and the possibility of paying a “toll” to pass through the strait) would violate strict U.S. sanctions on Iran, including a ban on providing any “material support” to the Islamic Revolutionary Guard Corps.
There is no surefire way to guess how this tumult will affect gas prices, but some analysts have used data from oil futures markets to estimate the likely impact on consumers’ pocketbooks. Earlier this week, RS published a handy calculator that harnesses this data to predict how much more Americans can expect to pay at the pump over the next year.