US President Donald Trump launched an attack on oil companies, accusing them of failing to pass the decline in crude oil prices on to consumers. In a post on the Truth Social platform, Trump argued that drivers are still paying unjustifiably high prices at gas stations. "In other words, consumers are being subjected to price gouging. I have ordered the Department of Justice to launch an investigation into the matter immediately. Gasoline prices should start decreasing much faster than what I am seeing today," he wrote characteristically. Trump's statements add another factor of uncertainty for the energy sector, as the market is called upon to balance between the de-escalation of geopolitical risks, demand fluctuations, and growing political pressure on oil companies to lower fuel prices for consumers. The national average price for regular unleaded gasoline in the US is currently around $3.93 per gallon, according to the most recent data from the AAA.
Why prices at the pump are not falling immediately
Although the price of crude oil has declined significantly in recent weeks, gasoline has not fallen at the same rate. According to Reuters, crude has lost about 23% from its May highs, while the average gasoline price has decreased by about 14%. This is why Donald Trump accused oil companies of "taking advantage" of consumers and asked the Department of Justice to examine the issue. The relationship between the price of crude oil and the retail price of gasoline is not always direct. Prices at gas stations are influenced by the costs of refining, transportation, storage, company profit margins, and taxation. Furthermore, passing on changes in crude oil prices to pump prices usually requires several days or even weeks. However, political pressures are intensifying as the American administration seeks to keep energy costs low for households and businesses, with Trump's gaze fixed on the November midterms, as his popularity has suffered a serious blow due to the war in Iran.
Oil price extends losses
Oil extended its losses during Wednesday's Asian trading as concerns about potential supply disruptions receded, while investors are closely monitoring developments in the Strait of Hormuz. Brent crude futures for August fell by 0.91%, to $76.38 per barrel. At the same time, US West Texas Intermediate (WTI) crude for August recorded a decline of 0.94%, to $72.52 per barrel. The correction comes after an impressive rally that had preceded it, when markets even feared the possibility of a prolonged blockade of the Strait of Hormuz.
Fear of supply problems is fading
The de-escalation of concerns regarding potential disruptions in the global oil supply continued to exert pressure on prices, following the intense volatility caused by geopolitical tension in the Middle East. Although the tension has de-escalated, investors are still closely monitoring developments in the Strait of Hormuz. About 20% of global oil consumption and a significant percentage of the global liquefied natural gas (LNG) trade pass through this specific sea passage, which connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. The slightest threat to navigation in the area can cause strong turbulence in energy markets, as tens of millions of barrels of crude from countries like Saudi Arabia, the United Arab Emirates, Kuwait, Iraq, and Qatar pass through there daily.
Traders are erasing the "geopolitical premium"
Analysts point out that much of the recent decline is due to the removal of the so-called "geopolitical premium" that had been embedded in prices. During the crisis, investors were discounting the possibility of supply disruptions, which had driven Brent to multi-month highs. With the de-escalation of tensions, this additional premium is gradually being withdrawn from the market. At the same time, investors are turning their attention back to the market fundamentals, such as global fuel demand, the production policy of OPEC+, and the trajectory of the Chinese economy.
Eyes on OPEC+, inventories, and demand
Investors are now watching three key factors that will determine the course of oil in the coming months: OPEC+ production decisions, the path of American inventories, and demand from China, which remains the largest importer of crude globally. If geopolitical calm is maintained and supply remains sufficient, several analysts consider a continuation of the correction to be likely. Conversely, any new tension in the Persian Gulf or a surprise production cut by OPEC+ could quickly restore upward pressure on oil prices.
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