Falling Gas Prices Provide Relief for Drivers
Gas prices in the U.S. are on the decline, providing some much-needed relief for drivers who are paying less to fill up their tanks. The national average for gas prices on Monday was around $3.44, down about 9 cents from the previous week. This is the largest one-week drop recorded by AAA so far in 2024. Gas prices are also significantly lower compared to a month ago, with a decrease of over 19 cents, and compared to the same time last year, with a decrease of over 14 cents.
The recent fall in gas prices can be attributed to a combination of factors. Industry analysts point to lackluster demand and strong supply, as well as relatively mild oil prices worldwide. One contributing factor to the decline in demand is the potential lingering impact of the COVID-19 pandemic. AAA spokesperson Andrew Gross explains that traditionally, demand would start to pick up in the summertime after Memorial Day, but this trend is no longer evident. Last week, data from the Energy Information Administration showed that U.S. gasoline demand slipped to about 8.94 billion barrels a day. While this may still seem like a significant amount, consumption before the pandemic could reach closer to 10 billion barrels a day at this time of year.
In addition to pandemic-related impacts, experts also suggest that high gas prices following Russia’s invasion of Ukraine in 2022 and persistent inflation may have led many Americans to modify their driving habits. The increased number of fuel-efficient cars and electric vehicles on the road today may also be contributing factors.
Another reason for the decline in gas prices is seasonal. Patrick De Haan, head of petroleum analysis at GasBuddy, explains that gas prices typically ease in early summer due to refinery capacity. Many factors that contribute to higher prices in late winter and early spring, such as refinery maintenance, are no longer present at this time of year. De Haan notes that once refinery maintenance is complete, the output and utilization of the nation’s refineries increase, leading to a rise in supply. This stronger supply, combined with weaker consumption, results in a noticeable decline in prices.
The Biden administration’s decision to release 1 million gasoline barrels from a Northeast reserve aims to lower prices at the pump this summer. However, De Haan points out that this action has little impact nationally as 42 million gallons of gasoline only equal less than three hours of U.S. daily gas consumption.
The cost of crude oil, the main ingredient in gasoline, also plays a significant role in gas prices. West Texas Intermediate crude, the U.S. benchmark, has remained around the mid $70s a barrel in recent weeks. According to Gross, this is not a bad place for oil prices to be, as the cost of crude typically needs to go above $80 to put more pressure on pump prices. Global forces, such as production cuts from OPEC and allied oil-producing countries, can contribute to volatility in oil prices.
Looking ahead, if there are no major unexpected interruptions, both Gross and De Haan believe that gas prices could continue to decrease. However, they caution that hurricane risks during this time of year could cause significant damage and lead refineries to power down. Concerns particularly rise once a hurricane enters the Gulf of Mexico, and even if it doesn’t make landfall, refineries may reduce operations as a precautionary measure. Prices can also vary by region.
While gas prices are collectively falling nationwide, certain states consistently have lower average prices than others due to factors such as nearby refinery supply and local fuel requirements. The lowest average gas price as of Monday was in Mississippi at about $2.94 per gallon, followed by Oklahoma at $2.95 and Arkansas at just under $2.97. On the other hand, California, Hawaii, and Washington had the highest average prices, with values of about $4.93, $4.75, and $4.41 per gallon, respectively.
Overall, the recent decline in gas prices provides some relief for drivers across the country. While the future of gas prices is never certain, analysts expect the national average to remain in the range of $3.35 to $3.70 per gallon this summer. Additionally, gas prices typically drop further in the fall, with the possibility of seeing the national average below $3 in late October or early November.