US-Iran peace talks: Fuel prices unlikely to drop soon, experts warn

The sharp decline in global oil prices following reports of a possible peace agreement between the United States and Iran has sparked hopes among consumers that fuel prices could soon fall, Daily Trust can report.

However, energy experts have cautioned that Nigerians should not expect an immediate reduction in petrol prices despite the easing tensions in the Middle East.

Brent crude, the international benchmark for oil prices, dropped to about $87 per barrel after U.S. President Donald Trump signalled that negotiations between both countries were progressing positively.

The development reduced fears of a prolonged conflict that could disrupt global oil supplies.

The price decline came after weeks of volatility in the international oil market. At the height of the crisis, concerns over potential disruptions in the Strait of Hormuz—a key shipping route for global crude oil exports—had pushed oil prices significantly higher.

With optimism growing over a potential diplomatic breakthrough and the possible reopening of the Strait of Hormuz, markets responded swiftly.

Brent crude fell from levels above $90 per barrel, while West Texas Intermediate (WTI) crude also recorded sharp decline.

As of yesterday, Brent Crude was $87.33 while WTI was 84.88.

Despite the decline, experts argue that the current oil price remains substantially higher than pre-crisis levels and may not be sufficient to trigger a meaningful reduction in domestic fuel prices.

Daily Trust reports that a litre of premium motor spirit (PMS) in Nigeria hovers between N1,290 to N1,350 per litre from little above N700 per litre in February.

Speaking on the development, oil and gas expert Dr. Ayodele Oni said many Nigerians mistakenly assume that a drop in crude oil prices automatically translates to cheaper petrol at filling stations.

According to him, the relationship between international crude prices and domestic fuel prices has become more complex under Nigeria’s deregulated petroleum market.

“We need to separate two things that often get confused: the crude oil price and the pump price of petrol,” he explained.

“Even though Brent crude has fallen to around $87 per barrel, it remains significantly above the levels recorded before the conflict. Earlier in the year, prices were around $70 per barrel. What we are seeing now is the market reacting to expectations that a deal may be reached. The agreement has not yet been formally concluded,” he said.

He noted that investors are already pricing in the possibility of a peace deal and the reopening of the Strait of Hormuz. However, until a binding agreement is signed and implemented, uncertainty will remain in the market.

Oni added that even if crude oil prices continue to decline, fuel prices in Nigeria may not fall proportionately because several other factors influence the final retail price of petrol.

“The most important factor today is the exchange rate. Nigeria still relies heavily on dollar-denominated transactions in the petroleum sector. If the naira remains under pressure, any gains from lower crude prices could be erased,” he said.

According to him, transportation costs, refining expenses, distribution margins and financing costs also play major roles in determining pump prices.

He explained that lower crude oil prices alone cannot guarantee cheaper fuel unless they are accompanied by exchange rate stability and improved efficiency across the supply chain.

Professor Dayo Ayoade, an energy law expert at the University of Lagos, shared a similar view, noting that global oil prices are influenced by market fundamentals as well as geopolitical risks.

He explained that the recent decline in oil prices reflects a reduction in what analysts call the “risk premium” that traders attach to commodities during periods of uncertainty.

“When there is a war or the possibility of disruptions to major supply routes, markets tend to build additional risk into oil prices. Once tensions ease, that premium begins to disappear and prices adjust accordingly,” he said.

Ayoade noted that oil prices rise and fall based on supply and demand dynamics, but geopolitical developments often amplify those movements.

He argued that while reduced tensions between the United States and Iran are positive for global markets, the domestic impact on fuel prices may be limited in the short term.

“There is no longer a fixed or normal fuel price in Nigeria. Since the implementation of the Petroleum Industry Act and the removal of fuel subsidies, prices are increasingly determined by market forces,” he explained.

The professor added that consumers should understand that fluctuations in international oil prices are now only one of several factors affecting local fuel costs.

“Of course, lower crude prices are beneficial because they reduce input costs. But that does not mean petrol prices will automatically return to previous levels. The market environment has fundamentally changed,” he said.

Also commenting on the issue, Professor Emeritus of Petroleum Economics, Wumi Iledare, said the long-term direction of oil prices would depend on whether the proposed U.S.-Iran agreement results in a sustained increase in global oil supply.

He explained that geopolitical tensions had contributed significantly to recent price increases, and a successful agreement could gradually remove that pressure.

“What we are witnessing is the market adjusting back toward supply-and-demand fundamentals,” he said.

“The geopolitical premium that drove prices upward may decline substantially if a deal is successfully concluded. However, geopolitical risks will not disappear entirely because the Middle East remains a strategically important region.”

Iledare noted that even if crude prices soften further, the impact on fuel prices could be moderated by other economic variables.

“Fuel pricing is influenced by refining costs, transportation expenses, exchange rates, taxes and regulatory policies. Therefore, lower crude oil prices do not necessarily guarantee proportionate reductions at the pump,” he said.

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