HOUSTON—Gasoline prices have reversed course in recent weeks, giving consumers a welcome break.
Gasoline was a major cause of US consumer prices rising 9.1 percent in June from a year earlier, the largest annual increase in four decades. But gas prices have now fallen 28 days in a row, the longest decline since the collapse in energy demand in early 2020 as the COVID-19 pandemic crippled the economy. Energy analysts say US consumers are spending $140 million less on gasoline than they did a month ago.
This trend could easily be reversed, especially if a hurricane hits a refinery on the Gulf Coast, where global oil supplies remain somewhat scarce. But for now, the country’s inventories are growing slowly, in part due to the government’s continued release of oil from its strategic petroleum reserves and declining consumption.
The National average price per gallon of regular gasoline Wednesday was $4.63, down more than 2 cents from Tuesday, according to the AAA Automobile Club. Prices are down 15 cents over the past week and 38 cents compared to four weeks ago, when the average price rose to just over $5 a gallon.
The declines were particularly sharp in Texas, Ohio, Illinois and California, all states of economic importance, where prices have fallen 16 cents or more over the past week.
President Biden was quick to herald a reduction in gas prices, because their rise was a political risk to him.
“In the past 30 days, the average price of gas has fallen by 40 cents a gallon,” He said on Twitter. “This is a breathing room for American families.” Noting that oil prices have fallen more rapidly than fuel prices, Oil companies urged To transfer their savings to consumers.
Gasoline prices are especially important for lower-income families, who generally drive longer distances to work and own older, less efficient cars. But prices at the pump also shape consumers’ perceptions of inflation more broadly because they notice the ups and downs on street corners every day.
Drivers are beginning to notice the difference, and what they see in admiration.
“There is always a fear that prices will go up but never go down,” said Melanie Wilson Lawson, a professor of health sciences, as she filled up a tank at a gas station outside of Houston. But I see a big difference now. It’s huge.” This helps ease her financial insecurity, which has led her to cut back on eating out in recent weeks.
Mrs. Wilson Lawson said she hoped Mr. Biden’s discussions about his current trip to the Middle East It would prompt oil producers to increase supplies and lower prices. But how much Saudi Arabia and other Middle Eastern countries can produce, even if they wanted to, is questionable. Production in many countries, especially Libya, has been hampered by political unrest.
Fuel affects the prices of all goods shipped, especially food. Profits for farmers, builders and airlines depend largely on fuel costs, especially diesel and jet fuel, which are declining but at a slower rate than gasoline. The national average price for a diesel, $5.61 a gallon, is 16 cents lower than it was a month ago.
The 3 percent drop for diesel compares to 7 percent for gasoline. Wholesale jet fuel prices, which don’t include taxes like other fuels, have fallen nearly 11 percent over the past month, compared to 24 percent for wholesale gasoline prices. One of the main reasons for the slow decline in domestic diesel prices is a significant increase in exports to Europe to offset reduced supplies from Russia since its invasion of Ukraine in February. Imports into the US have shrunk considerably since the tightening of the global diesel market.
The drop in prices at the pump came on the heels of the drop in global oil prices, which were Decreased over the past month Amid growing signs of a slowdown in the global economy.
Fears that tightening Western sanctions on Russia would significantly reduce global oil stocks have proven to be exaggerated since Moscow succeeded in replacing European markets With sales to China, India and South America. Meanwhile, expectations that China’s economy, the largest importer of crude, will rebound due to shutdowns in important cities in response to the ongoing booms of Covid-19, have not materialized.
Patrick de Haan, head of petroleum analysis at GasBuddy, a Boston company that tracks fuel prices, said the trend of lower gasoline prices could continue for a fifth week as long as oil prices — which have fallen below $100 a barrel — do not rise above that. 105 bucks.
We haven’t quite come out of the woods yet,” Mister Di Han said. “There is still a risk of a price hike that could send us to new highs in August in the event of any disruptions. It may be a road trip, but for now, it will continue to drop at the pump.”
Gasoline price volatility usually follows oil prices for about a week, because petroleum needs to be processed and refined before it reaches gas stations, which base their retail prices on the wholesale price.
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Oil prices have been particularly volatile lately. It fell more than 7 percent on Tuesday and rose slightly on Wednesday. The price of Brent crude, the international benchmark, has fallen from a peak of nearly $140 a barrel shortly after the invasion of Ukraine, while the US benchmark, West Texas Intermediate, has peaked above $130. Both were under $80 at the start of the year.
A report from ESAI Energy, an analytics company, said Wednesday that the company expects a global surplus of four million barrels per day in the market of about 100 million barrels per day in the second quarter. “This is a significant drop in demand,” said Sarah Emerson, president of ESAI.
In addition to demand, the surplus reflects the release of strategic reserves from several countries, including the United States. These releases will eventually expire, and the reserves will need to be replenished in the future, with a new source of demand being added early next year. A recovery in demand in China is likely to happen sooner or later, although Chinese reserves are currently high.
Oil production is increasing in the United States – although still below pre-pandemic levels – as well as in Guyana, Brazil and a few other countries. Oil companies are warning against drilling too quickly, in part because they fear a sudden drop in prices.
Many energy experts believe the price break is temporary.
“It’s a nice little respite in the middle of summer, based on increased supply and demand,” said Tom Kloza, global head of energy analysis at Oil Price Information Service. But I’m very hesitant to say we’ll never see $5 petrol again. Hurricane will be the mother of all monkey keys in this milder market.”
But for now, Mr. Kloza said, the high prices in recent months appear to have affected driving decisions.
A Department of Energy report released on Wednesday showed that gasoline demand in recent weeks has fallen by 1.35 million barrels per day, or more than 10 percent. Gasoline stocks rose last week by 5.8 percent, after falling by 2.5 million barrels in the previous week. This indicates that prices should continue to decline in the coming days.
According to a Citigroup report released on Wednesday, “Gasoline stocks are declining rapidly as demand remains weak,” which also indicated a recovery in diesel and jet fuel stocks. “This is against a global backdrop full of uncertainty – geopolitics, weather, epidemiological variables, recession – suggesting a volatile summer, but we are ultimately considering a downward trajectory for energy prices.”
Prices of other economically sensitive commodities, such as copper, have also fallen in recent weeks.
But with a gallon of gas still about $1.50 higher than it was a year ago, not everyone feels better at the pump.
“Honestly, I didn’t notice,” said Doug Johnson, sales director for the pipeline services company, as he filled his pickup truck outside Houston on Tuesday. “You’re talking cents, I’m talking dollars. We made a conscious decision not to take a vacation this summer.”
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