Key facts
- President Trump has accused oil companies of price gouging and ordered the Justice Department to investigate gasoline pricing.
- Oil majors like ExxonMobil and Chevron are projected to report significantly higher profits for the second quarter compared to the first.
- The oil industry attributes the slow decline in gasoline prices to supply chain economics, including refining, transportation, and distribution lags.
- Gasoline prices typically rise quickly with crude oil but fall more slowly due to the time it takes to process and sell higher-cost inventory.
- The U.S. national average gasoline price has decreased from its May peak but is higher than the previous year.
President Donald Trump has intensified his criticism of major oil companies, accusing them of "gouging" consumers by not lowering gasoline prices quickly enough despite falling crude oil costs. He has directed the Justice Department to investigate these practices.
Oil majors like ExxonMobil and Chevron are poised for significant profit increases in the second quarter, with earnings expected to nearly triple compared to the first quarter. This surge in profits comes as crude oil prices reached a four-year high due to supply disruptions, including the closure of the Strait of Hormuz, which crippled oil flows from the Middle East and depleted global inventories.
The industry attributes the slow decrease in gasoline prices at the pump to the inherent lags in the supply chain. It takes several weeks for crude oil to be refined, transported, stored, and distributed to retail stations. Consequently, even when crude prices fall, retailers continue to sell fuel derived from higher-cost inventory. This 'rockets and feathers' phenomenon, where prices rise quickly but fall slowly, is a cyclical aspect of the industry, according to oil executives.
Despite these explanations, President Trump is demanding that gasoline prices be reduced immediately to between $2.25 and $2.50 per gallon, a target far below current levels. The U.S. national average gasoline price has seen some decline from its May peak but remains higher than the previous year. The American Fuel & Petrochemical Manufacturers have suggested that modifying the Renewable Fuel Standard could help lower fuel costs.