Houston — Soaring gasoline prices in recent months have reversed the course in July, giving consumers a welcome break.
Gasoline was the main reason for US consumer prices to rise 9.1% year-on-year in June, the highest annual rate of increase in 40 years. But now, gas prices have fallen for 28 consecutive days, the longest fall since the collapse of energy demand in early 2020, as the Covid-19 pandemic paralyzed the economy. According to energy analysts, US consumers are spending less than $ 140 million on gasoline than they were a month ago.
The world’s oil supply remains fairly tight, so this trend can easily be reversed, especially if a hurricane knocks out a Gulf Coast refinery. But so far, national inventories are growing slowly. This is partly due to the government’s continued release of oil from its strategic oil reserves and reduced consumption.
The Average domestic price per gallon of regular gasoline A gallon on Wednesday was $ 4.63, down more than two cents from Tuesday, according to the AAA Automobile Club. Prices fell 15 cents last week, down 38 cents from four weeks before the average price rose to just over $ 5 a gallon.
Texas, Ohio, Illinois, and California are all economically important states, with prices dropping more than 16 cents last week.
President Biden immediately foretold a cut in gas prices because rising gas prices were a political danger to him.
“In the last 30 days, the average price of gas has fallen by 40 cents per gallon.” He said on twitter.. “It’s room for breathing for American families.” Noting that oil prices fell more rapidly than fuel prices, noting that He urged the oil company To return savings to consumers.
Gasoline prices are especially important for low-income families who generally drive long distances to work and own old, inefficient cars. However, pump prices make up the consumer’s perception of inflation more broadly, as consumers observe the ups and downs of street corners every day.
Drivers are beginning to notice the difference and like what they see.
Health science professor Melanie Wilson Lawson said when filling a tank at a gas station in the suburbs of Houston, “there is always the fear that prices will go up but never go down.” “But now there’s a big difference. It’s huge.” It helps alleviate her financial anxiety that she has urged her to reduce eating out in the last few weeks.
Wilson Lawson said Biden’s current discussions on travel to the Middle East hope to encourage oil producers to increase supply and lower prices. But it is doubtful how much Saudi Arabia and other Middle Eastern countries can produce, if at all. Production in some countries, especially Libya, has been plagued by political turmoil.
Fuel affects the price of all goods shipped, especially food. The profits of farmers, construction companies and airlines are highly dependent on fuel costs, especially diesel and jet fuels. These are declining, but slower than gasoline. The national average price for diesel is $ 5.61 a gallon, 16 cents lower than it was a month ago.
A 3% reduction in diesel is compared to a 7% reduction in gasoline. The price of wholesale jet fuel, which does not include taxes like other fuels, is down about 11 percent from last month. The main reason for the slowdown in domestic diesel price declines is a significant increase in exports to Europe to compensate for the decline in supply from Russia since the invasion of Ukraine in February. Imports have declined slightly since the global diesel market was tight.
The fall in pump prices follows the fall in global oil prices, which has been declining since last month, as signs of a slowdown in the global economy are increasing.
Concerns have been exaggerated that tightening western sanctions on Russia will significantly reduce global oil inventories since Moscow succeeded in replacing the European market with sales to China, India and South America. Has been proven. Meanwhile, expectations of a recovery in China’s economy, the largest importer of crude oil, were also unsatisfied due to the blockade of important cities in response to the continued surge in Covid-19.
Patrick de Khan, head of oil analysis for Boston’s Gas Buddy, who tracks fuel prices, said the downward trend in gasoline prices could continue for five weeks unless oil prices were below $ 100 a barrel. Said there is. $ 105.
“We haven’t completely left the forest yet,” said Dehan. “In the event of a turmoil, there remains the risk of price spikes that could send us to new record levels in August. It may be a wild vehicle, but for now, the pump plunge continues. Probably. “
Gasoline price fluctuations usually last for about a week, as oil needs to be processed and refined before it reaches a gas station that determines retail prices based on wholesale prices.
Recently, oil prices have been particularly fluctuating. They plummeted by more than 7% on Tuesday and were slightly higher on Wednesday. The price of Brent crude oil, the international benchmark, fell from a peak of nearly $ 140 per barrel immediately after the invasion of Ukraine, while the US benchmark West Texas Intermediate peaked above $ 130. Both were below $ 80 earlier this year.
According to a report by analytics firm ESAI Energy, the company expects a global surplus of 4 million barrels per day in a market of approximately 100 million barrels per day in the second quarter. “This is a significant drop in demand,” said Sarah Emerson, president of ESAI.
Beyond demand, the surplus reflects the release of strategic stockpiles from several countries, including the United States. These releases will eventually end and future reserves will need to be replenished, with new sources of demand added as early as next year. China’s reserves are currently high, but a recovery in China’s demand is likely to occur sooner or later.
Oil production is increasing in the United States (although it remains below pre-pandemic levels), and in Guyana, Brazil and several other countries. Oil companies are paying attention to the drilling speed being too fast, partly because they are afraid of sharp drops in prices.
Many energy experts consider price cuts to be temporary.
Tom Croza, Global Head of Energy Analysis for Oil Price Information Services, said: “But it’s very reluctant to say that $ 5 petrol will never be seen again. The hurricane will be the mother of all monkey wrenches in this milder market.”
But so far, Mr. Croza said the highs in recent months seemed to have influenced driving decisions.
Gasoline demand has fallen by more than 1.35 million barrels a day, or more than 10 percent, in recent weeks, according to a report from the Energy sector released Wednesday. Last week’s gasoline inventories increased 5.8% after falling 2.5 million barrels last week. This suggests that prices should continue to fall for the next few days.
Prices for other economically sensitive commodities like copper have also fallen in recent weeks.
But not everyone is feeling better with a pump, as a gallon of gasoline remains about $ 1.50 higher than it was a year ago.
“Honestly, I wasn’t aware,” said Doug Johnson, a sales manager at a pipeline service company, who filled his pickup truck outside Houston on Tuesday. “You’re talking about cents, and I’m talking about dollars. I made a conscious decision not to take a vacation this summer.”
