SCOTT DETROW, HOST:
The announcement of a deal intended to end the war with Iran has sent stock markets up and brought oil prices down. NPR's Camila Domonoske covers energy and is here to walk us through the economic implications of all this. Hey, Camila.
CAMILA DOMONOSKE, BYLINE: Hello.
DETROW: What does this mean for the energy markets?
DOMONOSKE: I mean, this is exactly what the oil industry has been waiting for since the start of this conflict, really. And oil prices dropped promptly as soon as the news came out. The key element here is that President Trump says this deal, after it's signed Friday, will reopen the Strait of Hormuz. But the actual terms of the deal itself are not public. Jim Burkhard watches oil markets for S&P Global Energy, and he has a lot of questions.
JIM BURKHARD: What are the terms under which it's going to reopen? Is it going to be as it was last February, or is it going to be something different? And we don't know yet.
DOMONOSKE: So, you know, how quickly will it reopen? Will Iran still be regulating traffic? Will there be tolls? All of these things will affect how much ship traffic actually gets through that waterway.
DETROW: Assuming this agreement holds up and is signed and put into place, would that mean that we can all stop thinking about oil prices?
DOMONOSKE: That would be lovely, wouldn't it? There are so many other things that we could talk about on air, Scott. But no is my answer.
DETROW: Ah.
DOMONOSKE: And let me start by just acknowledging that oil prices have dropped dramatically on news of an imminent deal so many times over the last few months - every time, there was a tweet or a headline about it, and a deal never happened before. This time, we have both sides saying a deal is happening, so that is different. Prices have dropped to their lowest point since early March.
So the global benchmark for crude is at around $83 a barrel now. That's down from wartime highs where there was a lot of time spent above a hundred bucks a barrel - still higher than prewar when it was in the 60s. And it's going to take time for the global oil system to recover to something like normal, whether you look at production or transportation of crude. We're talking months, into maybe next year before things recover from this profound shock.
DETROW: OK. Given all of that, then, any sense of what everything you just laid out will mean for the price of gasoline.
DOMONOSKE: Yeah. Assuming this holds, they'll get cheaper. So prices peaked at a national average per gallon of about $4.50. They have already dropped from those highs for several weeks, largely on anticipation of a deal like this. So the national average is now around $4. I will note, obviously, prices vary based on where you are. But they are dropping across the country and at current oil prices, likely to drop more. But again, just like with oil prices, this comes with the caveat that we are still looking at prices elevated if you compare them to prewar.
DETROW: We all experienced very deeply just how much the price of oil affects the price of everything else. Any sense what this deal could mean for the broader economy, given that?
DOMONOSKE: Yeah. A relief globally to countries that were suffering from the supply shocks. It relieves inflationary pressure - high fuel drives up the price of everything. And it's not just oil, other things pass through the strait. So no deal signed yet. If it's signed, it's still precarious. But overall, it's a positive move for the global economy.
DETROW: NPR's Camila Domonoske, thanks so much.
DOMONOSKE: Thank you. Transcript provided by NPR, Copyright NPR.
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