It’s a cool breeze during a hot moment, but it’s not summer time.
As a record number of Americans pack their cars and travel to the fourth-of-July barbecues that will cost them more than last year, they’ll fill up at gas stations where they’re likely to pay a little less at the pump.
Believe it or not, average national gas prices have recently been declining. Slightly.
On Thursday, the average was $ 4.85 per gallon, according to AAA data reflecting a drop since mid-June.
That’s a one-cent drop from the previous day, a nearly one-cent drop from $ 4.94 a week ago, and a 16-cent drop from the record-high $ 5.01 set in mid-June. A gallon still costs more than 20 cents more than a month ago and $ 1.74 more than a year ago.
According to Patrick De Haan, head of oil analysis at GasBuddy, drivers have spent two weeks in a row on declining average prices and the downward trend is set to continue for a third week. Gas prices hit a record $ 5.03 on June 16 and the average price has dropped to $ 4.84, according to the gas price aggregator.
The downward trend in prices “doesn’t seem to be brief,” De Haan said. The welcome trend could also continue for a fourth and fifth week, he said. From that moment on, he said, he is too far away to venture to guess what the future holds. De Haan noted that there are several factors that could drive up the price again, such as a hurricane knocking down supply chains.
Make no mistake, gas prices are still exceptionally high and could even reach $ 6 per gallon in late summer, according to some forecasts.
Millions of drivers are paying far above average prices, starting in California. There, drivers, who are now online to get state “inflation relief” checks, paid $ 6.28 per gallon according to the AAA count on Thursday and $ 6.26 per gallon according to data of GasBuddy.
At a time when inflation remains hot and Russia’s war in Ukraine shows no signs of cooling, what is causing the slight drop in gas prices? And how long could the trend continue as the summer driving season begins?
According to observers, it is a mixture of more supply, softening demand and anxiety over a macro-level recession that is trampling on oil investors.
For De Haan, the big reason is more supply through more refinement action. U.S. refineries worked at 95% of their “operating capacity” the week ended June 24, according to data from the U.S. Energy Information Administration. This is the highest reading in 30 years, according to a note from Phil Flynn, senior market analyst at The Price Futures Group.
One month ago, the operational capacity rate was 92.6% and two months ago, it was 90.3%, De Haan said. America may benefit from increased refining capacity, but figures show that refineries that are working are doing so strongly, he said.
“The supply side of the equation is improving and the demand side is holding up,” De Haan said, adding that higher prices have only reduced demand to some extent.
An indicator of demand is the estimated daily amount of product supplied by the U.S. Energy Information Administration, according to AAA spokesman Devin Gladden. For the week ending June 24, it was 8.93 million barrels a day. The previous week, it was 8.943 million barrels.
“People can’t afford high prices,” Gladden said. It is a topic that appears in some surveys, including a Cars.com survey that shows that many drivers opt for nearby destinations to save gas.
High prices rarely scare consumers and pierce large-scale demand, a note from RBC Capital Markets said Wednesday. In three decades, there were 39 months in which prices rose 30% year-over-year, analysts wrote. When that happened, only 12 months passed in which demand fell by at least 2%, they noted.
Five occurred in 2008, but the comparison with now did not work because, according to analysts, consumers were in better financial condition.
“Despite record bomb prices, current [consumer] spending as a percentage of total spending remains below historical averages, “the note said. they are really affected “.
Demand is likely to rise for holiday travel, leading to prices, Gladden said. “After that, prices could continue on this downward trajectory,” he said.
Oil prices are softening as investors consider what the demand will be if a recession occurs, Gladden said. “The downward trajectory is certainly being passed on to consumers.”
Just don’t be fooled, he warned. As long as the price of crude, the main component of gas prices, stays above $ 100 a barrel, no real relief will be seen. On Thursday, West Texas Intermediate crude for delivery in August fell to $ 4.01 to $ 105.77.
The break in statewide gas taxes may also be affecting prices. This is even if skeptics say movement is a trick.
For example, Georgia’s shutdown on its gasoline tax has dropped between 16.8 and 18.8 cents per gallon, according to researchers in Penn Wharton’s budget model. The Connecticut gasoline tax shutdown will end in June and drivers have saved between 17.9 and 21.7 cents per gallon.
President Joe Biden wants lawmakers to pause the federal tax of 18.4 cents on gasoline over the summer, but analysts doubt that will happen.