Will diesel prices decrease? Not so fast…

The announced peace agreement between the United States and Iran has caused oil prices to fall. This is good news, but the drop in diesel prices at the pump will not be immediate or automatic.

The announcement of a framework agreement between Washington and Tehran has caused a real sense of relief in energy markets. By Monday, Brent crude dropped nearly 5%, falling to around $83, its lowest level in three months. American WTI crude even fell below $80. Investors are anticipating a gradual reopening of the Strait of Hormuz, a strategic maritime route through which about 20% of the world’s oil passes. 

On paper, this easing should lead to lower fuel prices, including diesel. However, the reality is more complex.

The Desperate Slowness

First, the price displayed at the pump never reacts instantaneously to fluctuations in crude prices. Distributors are selling off their stocks that were purchased several weeks earlier, and refineries are operating under already negotiated contracts. Generally, it takes between one and three weeks for changes in crude prices to fully reflect at gas stations.

Next, diesel also depends on the refined diesel market, where prices can fluctuate differently from those of crude oil. The logistical tensions observed since the start of the conflict in the Middle East have not completely disappeared. Several analysts remind us that a return to normal traffic in the Strait of Hormuz could still take several weeks or even months, particularly due to security operations and mine clearance. 

Finally, markets remain cautious. The agreement is not yet officially signed, and there are still several unknowns. Experts particularly point out that other regional players could still disrupt the peace process. 

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So, will diesel prices drop? Probably yes, in the short term. However, drivers should not expect a collapse in prices. If the geopolitical easing is confirmed in the coming weeks, the decrease might remain limited to a few cents per liter. A welcome improvement, but far from a return to the prices seen before the crisis in the Strait of Hormuz. 

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