After the Blue Wave, will we see lower gas and food prices?

Democrats have gained control of both chambers of Congress after last week's midterms, leaving the party with 55 Senate seats and 255 House seats. For voters, the economy and cost of living were top of mind, according to exit polls.

After the pandemic began, inflation reached highs not seen in decades, peaking at 9.1% in 2022. Since then, there's been an anti-incumbent wave happening around the world, which some political science experts attribute to a rise in inflation across the globe. In 2024, Marketplace looked at elections happening in developed countries and found that more than 70% of incumbent presidents or prime ministers lost their elections between 2022 and 2024.

While inflation has cooled down, it remains stubborn and many Americans are still struggling financially. Economists estimate that inflation was 4% year-over-year in October (experts had to extrapolate this figure since the Bureau of Labor Statistics didn't publish last year's October's figures due to the government shutdown). Month-over-month inflation stood at 0.4%, which is more than economists expected. Nothing is going in the right direction with inflation, Andrew Davis, head of investment strategy at Bryn Mawr Trust, told Marketplace.

The Trump administration's decision to implement tariffs and start the Iran War, leading to the closure of the Strait of Hormuz and a decline in refining capacity, have led to higher grocery bills and gas prices. Although the Supreme Court struck down Trump's reciprocal tariffs, his administration implemented or raised tariffs on other imports, like steel and aluminum, that are still in effect.

But there are limitations to what Congress could do. They could repeal Trump's tariffs (and there is interest in rolling back Canadian tariffs), but they would need two-thirds majority in both chambers of Congress to overcome a presidential veto. Congress can also control funding when it comes to the Iran War, although they can't unilaterally end it.

Even if hypothetically tariffs were rolled back and the war ended, they've had long-lasting ripple effects that will make it hard for prices to decline or for inflation to moderate quickly.

Here's a look at what prices could go down and how long it'll take.

Gas and diesel prices

The national average for a gallon of gasoline stands at $3.87, compared to about $3.10 a year ago. Diesel is at over $6 compared to $3.80 this same time last year, according to AAA.

But customers are seeing a decline in prices because they tend to correct lower in November and the first half of December, said Tom Kloza, an energy advisor for Gulf Oil.

"It's just a time of the year when prices tend to come down because it's too early for the winter demand, but it's past the agricultural season for diesel, and it's past the driving season for gasoline," Kloza said.

In a Truth Social post on Thursday, President Donald Trump stated, "We don’t need a deal with Iran. Those days have long since passed." And Iran has said that the Strait of Hormuz will "never return" to its status prior to the war.

But if hypothetically there were a real resolution to the war in December and traffic in the Strait of Hormuz returned to normal, crude oil might go down from the $90 range to $80 by April or May, said Skip York, a nonresident fellow in energy and global oil at the Center for Energy Studies at Rice University’s Baker Institute.

By then, gas and diesel prices could decline by about 25 cents a gallon. For comparison, last year, crude oil per barrel was in the $60 range, York said.

If we want gas and diesel prices to go down even further, then other conflicts around the world would also need to end, namely the Russia-Ukraine war and the conflict between Saudi Arabia and the Houthis from Yemen, York explained. Sanctions on Russia would also have to end, and refining capacity in Russia and the Middle East will have to be rebuilt, he said. In the Middle East, that could take a year, and in Russia, that could take two to three years. Democrats can't control that and these issues will have to be resolved on their own timeline.

By the end of 2027, gas prices could go down to $3.40 to $3.50 if refining capacity in the Middle East improves, he added. But the decline of diesel prices will take longer, and it could take until 2028 or 2029 for prices to stabilize since its price is more strongly tied to the Russia-Ukraine war, York said.

There could, on the other hand, be changes at the state level – for example, some lawmakers have proposed waiving the state gas tax, said Tyler Schipper, an associate professor of economics at St. Thomas University. But that has its drawbacks.

"In many states, those gas taxes are specifically linked to infrastructure spending, and so you might just have to end up borrowing that money later when you need new roads or better bridges or things of that nature," Schipper said.

Your groceries

While gas prices can in theory go down if conflicts around the world are resolved, food prices are unlikely to.

Commodity prices swing up and down much more than non-commodities, and that has to do with inventory. If you're a refinery and you hit your inventory limit and you want to clear it, you're going to have to discount it to make sure operations continue running normally, York said. It can be dangerous to slow down production at an oil refinery because you have to change the temperature and pressure inside your units, York said.

So even if inflation slows, customers won't be able to pay what they used to for food. For context, since the pandemic was officially declared in 2020, food prices have risen about 31%.

But price increases, or inflation, can slow down. That won't happen right away, though, even if tariffs are rolled back and the Iran War ends.

"These increases that we're seeing today are due to factors and forces that were set in motion by policy, geopolitical conflicts many months ago. Grocery prices are not something that you can influence from one month to the next," said David Ortega, a food economist and professor at Michigan State University.

Let's say that hypothetically aluminum and steel tariff rates revert back to what they were prior to the second Trump administration, and the end of the Iran War meant an end to attacks, along with a return to normal refining capacity and normal shipping levels in the Strait of Hormuz.

Ortega estimates that in that ideal scenario, it could take between six months up to a year before we start seeing changes trickle down to the grocery store.

Food inflation could go down back to 1% to 2%, year over year, which is considered normal, Ortega said. In September, year-over-year food inflation was at 2.5%.

Economists say that we do need some inflation and that deflation is bad because if something will be cheaper tomorrow, then customers aren't incentivized to buy it today. (More on the negative effects of deflation here.)

If diesel prices go down, that could alleviate the cost of transportation and other aspects of the agrifood supply chain, Ortega said. Price declines could help products that are more perishable; travel longer distances; and rely on refrigerated trucking, which uses up more energy, Ortega said.

"So think things like produce, dairy, meat," Ortega said.

Prices for fertilizer, which are crucial for crops like corn and wheat, could also go down after costs spiked following the Iran War. (However, Ortega said that fertilizer costs reach food prices with a longer lag, and make up a very small share of food costs.)

And we also have 50% tariffs on steel and aluminum, which has raised the cost of packaging for products, like canned goods. Price increases for these goods could stabilize if tariffs were rolled back, Ortega said.

More realistically, if Congress is able to repeal he 50% tariffs on Canadian goods, Schipper said that could affect a whole line of goods, including whey protein and agricultural products.

Housing

You might see improvements when it comes to housing affordability at the state level where lawmakers might not have to deal with a divided government, Schipper said.

States can use tax incentives and subsidies to encourage new homebuilding, and they can "provide incentives for local government to loosen housing regulation and speed up the permitting process," Schipper said.

But even if state legislatures tackle housing affordability starting in January and take a few months to pass new legislation that changes incentives, we might have to wait one or two years for new housing to finally become available, Schipper said.