Oil prices fall after U.S. midterm elections, may bring gas price relief

Global oil prices dropped significantly this week following the results of the U.S. midterm elections, which delivered a major victory for Democrats. Analysts link the decline to market expectations of increased political pressure on President Donald Trump after his party's poor performance. The price of Brent crude fell to US$97 a barrel from about $102 before the election, while U.S. West Texas Intermediate oil declined to around $90 from $96. Patrick De Haan of GasBuddy said oil markets are reacting to the new political reality in Washington. "Oil prices that had been closer to the highest side since spring are now closer to the lower side of that, and that could provide some meaningful relief," De Haan said.

De Haan predicts the lower oil prices could soon mean savings for Canadian drivers at the gas pump. He forecasts a drop of five to 20 cents per litre for gasoline and 10 to 20 cents for diesel in the coming weeks. This would translate to savings of up to $10 to fill a 50 litre tank. However, he cautions that prices will remain raised and not immediately return to previous levels. The ongoing war in Iran continues to affect oil infrastructure and shipping, keeping upward pressure on costs.

The Democratic Party secured control of both chambers of the U.S. Congress in the election, with the new session beginning in January. Voter concerns over high gasoline prices, exacerbated by the conflict in Iran, were a significant factor in the results. De Haan explained that oil prices are largely set by expectations of future supply and demand, with geopolitical risks like the war causing increases. This week's declines represent a roughly 20 per cent drop for Brent crude and a 10 per cent drop for West Texas Intermediate. If maintained through Friday, it would mark the largest weekly price fall since April 2020.

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Despite the post-election drop, oil prices edged higher on Thursday due to renewed tensions in the Middle East. The situation remains volatile, with Iran reporting three more tankers were damaged in the Strait of Hormuz on Thursday. Iran's Revolutionary Guards said two tankers struck naval mines and another caught fire. A separate incident saw a vessel struck by projectiles on Wednesday, according to the UK Maritime Trade Operations agency. Attacks on commercial shipping in the Gulf region continue at a near-record pace, with at least five vessels reporting incidents since Sunday.

Efforts to resolve the conflict have so far yielded no breakthrough. Iranian officials have been meeting with Qatari mediators for over a week to discuss ending hostilities. Neither side has announced progress on the major issues blocking a peace agreement. Iranian Supreme Leader Ayatollah Mojtaba Khamenei said Wednesday that negotiations should not occur under threat. The persistent risk to oil supply from the region means any relief for consumers will be gradual. Nosy Mag reported earlier this month that Ontario Premier Doug Ford celebrated the Democratic wins, hoping for trade relief.

With files from Global News