SAN FRANCISCO (KRON/CNN) — Could the U.S. see gas prices back down to $2 a gallon, spurred by the recently negotiated Iran nuclear deal?
If sanctions are lifted, Iran’s nuclear deal with the West could add hundreds of thousands of barrels of oil to the global market each day, pushing prices at the pump drastically lower, according to industry analysts.
Iran hasn’t been able to sell oil to the U.S. since 1995. “[Iran] will only add to the oil glut on the market and increase the selling pressure,” according to Naeem Aslam, chief market analyst at Ava Trade.
Industry analysts say even if U.S. sanctions do stay in place for a while, the flow of Iranian oil to Europe will push down prices in global oil markets. Iran could add as much as 500,000 barrels of oil per day to worldwide markets by the end of this year, according to experts at a recent Credit Suisse conference on Iranian sanctions and oil.
Gas prices may only dip a few cents when the Iranian oil first starts to flow again, but by September drivers could see big savings. “Once we get past Labor Day, we should see gas falling by 10 to 15 cents a month,” said Tom Kloza, chief oil analyst with the Oil Price Information Service. “By December a lot of places are going to see gasoline at $2 or less.”
What’s also driving down the cost of gas is the decline in crude oil prices. Oil has plunged nearly 20 percent this month alone, and it briefly dipped below $47 a barrel on Tuesday. That leaves it flirting with the lows in March, which saw the weakest price since 2009.
Industry analysts say the U.S. is seeing a massive supply glut and the tepid global economy is depressing demand growth.
Nationwide, the cost of gasoline has been inching lower in recent days, with the average for regular unleaded at about $2.69, according to AAA. But prices in California still remain higher than the rest of the country. The state’s average for regular unleaded registered at $3.81 on Wednesday. The average was $3.62 in San Francisco.
Still, analysts say California’s prices should drop regularly in the days and weeks ahead, with the supply improving substantially.
“U.S. output has been remarkably resilient. Any kind of price rise will be met with a wall of output that will restrain any further price rise,” said Vincent Piazza, a senior analyst at Bloomberg Intelligence.