Falling Fuel Prices: US Profits Despite Middle East Conflict, Analysts Say

With tensions rising in the Middle East and oil production cut by OPEC+ members, some analysts expect gas prices in the U.S. to remain low. Prices in the U.S. have been declining since April and, despite the Israel-Hamas war, analysts say they could go lower this month, aided by plentiful refining capacity and weak consumer demand. Gas prices in the U.S. typically follow crude prices. Global oil prices have been under pressure due to the OPEC+ production cuts and a weaker global economy as a result of the coronavirus pandemic. U.S. crude prices fell 18 percent in April. Tensions between Israel and Hamas have escalated since the beginning of May, resulting in an exchange of rocket fire and airstrikes. However, analysts say that this conflict has had little impact on global crude oil prices and will likely have an even smaller effect on gas prices in the U.S. This is due to the fact that Israel and Hamas are not major players in the global crude oil market—particularly compared to countries such as Russia, Saudi Arabia, and the United States. Furthermore, the missile and airstrikes have so far been contained within the two countries and not spread to other parts of the Middle East. In fact, analysts say that the conflict could have a beneficial effect on gas prices in the U.S., as it would provide another excuse for OPEC+ members to extend their production cuts. In addition, the conflict could help the U.S. government by giving it another reason to cut back on or stop its tariffs on Chinese goods. Despite the Israel-Hamas conflict, analysts are confident that gas prices in the U.S. will continue to decline, due to the numerous other factors at play in the market. These include abundant refining capacity, strong production from the United States and Canada, and weak consumer demand. Analysts then predict that prices in the U.S. will remain low for the foreseeable future, barring some unexpected event or change in policy. The good news is that this will continue to provide American consumers with affordable gasoline.