Here’s why gas prices are falling

Economy / August 3, 2022 / Admin / 0

Gasoline prices have fallen 86 cents since hitting an average record high of $5.02 on June 14. In the past month alone, the national average is down 65 cents.

Nineteen states have average gas prices below $4, including Ohio, Iowa and Wisconsin, according to AAA.

The steady decline in gasoline prices has been driven by multiple factors, including recession fears that sent oil prices plummeting and some Americans reducing their driving when gasoline prices rose above 5 $ per gallon.

“When people pay and they see $100 for the bill, they freak out and go apoplectic,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service.

Kloza also credited the Biden administration’s unprecedented release of emergency oil from the Strategic Petroleum Reserve, though he admitted it’s hard to quantify the impact.

Whatever the cause, lower prices at the pump are giving a boost to consumers struggling with high prices on food, rent and everyday items.

Although the nationwide average price is $4.16 per gallon, Kloza noted that the figure is boosted by high prices in places like California. The median price, on the other hand, is $3.99, according to OPIS.

Some analysts say prices will continue to fall, especially as the summer driving season draws to a close.

“This streak has more room to run,” Kloza said.

Andy Lipow, president of consulting firm Lipow Oil Associates, expects the national average to drop to $4.10 a gallon over the next seven to 10 days and to $4 by Labor Day.

The oil is falling

Meanwhile, oil prices fell sharply on Wednesday, ending at levels not seen since Russia invaded Ukraine.

The losses were triggered by a new government report which revealed an unexpected rise in crude and gasoline inventories, raising questions about energy demand.

US crude fell 4% to $90.66 a barrel – the lowest close since Feb. 10, two weeks before Russia launched its war on Ukraine. Brent, the world benchmark, lost more than 3%.

Concerns about a global economic slowdown have driven oil prices down in recent days and weeks. Since closing at $123.70 a barrel on March 8, US oil is down about 27%.

Oil prices fell on Wednesday after the US Energy Information Administration said weekly oil inventories jumped 4.5 million barrels last week, compared to forecasts for a decline. Gasoline inventories also rose slightly.

The oil market initially rallied on Wednesday after OPEC+ announced an agreement to slightly increase production from September. That equates to the lowest percentage increase in production in OPEC history, according to Rapidan Energy Group.

Energy, Here's why gas prices are falling - CNN