Front month Brent futures (for June) jumped tonight. Where are gasoline prices going, conditional on those futures being predictive.

Figure 1: Brent oil price (black), NYMEX futures as of 4/19 (red), all in $/bbl. April observation for data through 4/10. NBER defined peak-to-trough recession dates shaded gray. Source: EIA via FRED, NBER, barchart.com.

Using a regression in log first differences of gasoline price on current and lagged oil price of 1990M10-2026M03 (adj-R2 = 0.56), this is the conditional forecast of gasoline prices:

Figure 2: Price of regular gasoline (blue), and forecast based on Brent futures (red), both $/gallon. NBER defined peak-to-trough recession dates shaded gray, barchart.com, NBER, and author’s calculations.

Oil futures are pretty much the most accurate predictors on average, as discussed in Chinn and Coibion (2014). However, these assessments usually focus mostly on peacetime sample periods. Futures were not particularly accurate during the 1990-91 Iraq war, nor the 2003 war, as noted in this post.

In the context of the current conflict, Norland (2026) observes:

…If the conflict ends soon and supply disruptions resolve quickly, crude prices could fall across the curve leading to losses for anyone who is long. That said, the fact that the returns of holding long positions during periods of contango have tended to be negative, while the returns on holding long positions during periods of backwardation tend to be positive tells us two two things:

Traders tend to underestimate how long periods of oversupply last. Hence markets in contango tend to remain at depressed prices for longer than investors initially imagine.
Likewise, traders had historically tended to underestimate how long periods of undersupply last. This can be true for demand shocks, such as the rapid increase in demand from Chinese and other emerging markets between 2003 and 2011, and can also be true during periods of supply disruption, such as following the U.S. invasion of Iraq.

and:

One key indicator to watch is shipping traffic through the Strait of Hormuz (Figure 7). Also, what happened to shipping traffic through the Red Sea and the Suez Canal offers a warning about how supply disruptions can carry on for longer than initially expected. After Suez traffic dropped off in late 2023, it never recovered in part because insurance companies withdrew from the market (Figure 8).

…

In other words, even with a nominal “re-opening” of the Strait, actual realized oil prices may very well exceed futures-implied prices.

A final reason for expecting elevated gasoline prices in the future, even if spot oil prices decline: the asymmetric response of gasoline prices to oil prices. Gasoline prices rise quickly with an oil price increase, and decline more slowly in response to an oil price decrease. This asymmetric response is termed the “rocket and feather” thesis. For an examination, see Wen et al. (2025). I ignored this effect in my regression specification above.

*  Unless there’s a global recession, which induces a big decline in demand…