Drivers could see $2 gas again by the end of the year, and a new nuclear deal with Iran is to thank.
Most western nations have imposed sanctions on Iran over the last five years in response to the nation’s growing nuclear program, keeping the country’s rich oil reserves off the market, but those countries have reached a new deal that could be pushing gas prices back down to rates it has not reached in years.
Oil will start flowing from Iran shortly, and gas prices are expected to follow shortly afterward.
“Once we get past Labor Day, we should see gas falling by 10 to 15 cents a month,” Tom Kloza, chief oil analyst with the Oil Price Information Service told CNN News. “By December a lot of places are going to see gasoline at $2 or less.”
There is still a measure of uncertainty of when $2 gas could return. Details of the sanctions are still in flux, with some members of Congress wanting the United States to keep them in place and President Obama vowing to veto those efforts.
But the potential is great. Iran could be adding up to half a million gallons per day to the worldwide market by the end of the year, and there are already 30 million gallons of oil in storage that can hit the market.
Some areas are in more need of relief than others. In California, gas has spiked, with prices in San Diego going from an average of $3.50 last Wednesday and shooting up to $4 by Monday.
Time explained further.
“According to AAA, the average statewide in California increased 28¢ per gallon over the past week, including a 22¢ spike just since last Friday. At the same time, drivers in many other states have been the beneficiaries of price decreases at gas stations: Average per-gallon prices in Indiana and Michigan, for instance, were down more than 10¢ in a week’s time.”
Gas prices in California are affected by a number of factors, including unusually high local taxes and fees and strict regulations on the amount of pollution allowed in blends.
“This is a complete disconnect with the rest of the country,” Tom Kloza, global head of energy analysis for the Oil Price Information Service, told the Los Angeles Times. “This really is illustrative of the fact that California is its own market.”
Experts said it could take several months for the full savings from the new Iran deal to reach consumers nationwide, with $2 gas expected to arrive by Christmas.
[Picture by Justin Sullivan/Getty Images]