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Gasoline Prices, a Source of Pain Last Year, Have Come Way Down

Americans filling up their cars this Memorial Day weekend will be breathing a sigh of relief, at least compared to a year ago when gas prices were skyrocketing.

The national average price of regular gasoline is $1 per gallon lower than it was a year ago. Drivers paid over $4.60 in May 2022, and the price reached $5 by the second week of June. They paid just over $3.50 a gallon of regular gas this week, according to the Auto Club’s AAA.

Many energy experts said they expect prices to remain at this level for most of the summer unless there is a major disruption to global oil supplies.

Gasoline prices are posted on big, colorful billboards on street corners, and can have a strong psychological impact on consumers, especially low- and middle-income consumers who tend to drive older, less fuel-efficient cars and spend more on gasoline. There is a nature. Energy income is higher than that of the wealthy.

“Who wouldn’t be happy to save money?” said Eddie White, 46, who uses pickup trucks to make deliveries and offers Uber rides. Mr. White, who lives in the Houston area, has saved about $420 a week by filling up with gas at least once a day, he said. He uses the money to pay for classes to become an insurance adjuster.

Aaron Hawkins, 22, owns a telephone store and serves in the Army Reserves. As a reserve, he is required to drive regularly between Houston and Baton Rouge, Louisiana. He said he saves $150 to $200 a month on gas.

“It’s a lot better for everybody,” he said of the price cuts.

Prices soared after Russia invaded Ukraine last February. Oil traders expected Russian exports to fall because of the sanctions imposed on the country by the United States and its allies in response to the aggression.

Although the war is still going on, Russia has found a way to continue to sell oil at deep discounts, mainly to China and India. As a result, the world’s oil supply remains abundant. It also helped that the United States and other developed countries dumped oil from strategic reserves when prices soared.

At the same time, demand for oil and the fuels produced from it has not surged. In the United States, vehicle fuel usage has not changed much since last year and has yet to return to pre-pandemic levels. But that may be starting to change. Gasoline demand rose last month, with AAA forecasting a 7% increase in holiday weekend trips from last year.

Stronger supply and weaker demand than many traders and analysts had expected led to a gradual decline in U.S. crude oil prices from about $120 a barrel last summer to about $73 a barrel on Friday. .

Prices briefly surged last month after Saudi Arabia, Russia and other major producers announced cuts of 1.1 million barrels a day, or just over 1% of global supply.

But that gain has ebbed and oil prices have fallen in recent weeks. Many traders are increasingly worried that the Federal Reserve’s interest rate hikes, aimed at curbing inflation, could slow the economy and trigger a recession. European central banks are pursuing similar policies.

Recession fears have also increased in recent weeks due to the suspension of debt ceiling talks between President Biden and House Republicans. Signs that the world’s most populous countries, China and India, are not buying as much fuel as expected are also dampening oil prices, according to a report by research and consulting firm Eurasia Group.

“Demand growth was strong last year, but supply growth was low,” said Linda Giesecke, head of demand analysis at consultancy ESAI Energy. “The balance between supply and demand is relatively even this year,” she said.

Nearly two years of battling high inflation have changed how and where many Americans buy gasoline and diesel, said Tom Croza, global head of energy analysis at Oil Price Information Service. said. Many people have started buying fuel at major retailers, which often offer lower prices than independent petrol stations.

“Costco, BJ, Sam’s Club, Bucky and Supermarket all gained market share in 2020-2022 and they’re not going to let it go,” Croza said. “It’s tougher for little people,” he said, referring to gas stations that use brands from big oil companies such as Exxon and Chevron but are usually family-owned or small business owned. rice field.

Warehouses and other large retailers negotiate the best deals with refiners and buy gasoline in bulk so they can offer lower prices.

Another factor pushing prices down is the growing popularity of electric vehicles. Battery-powered vehicles could become increasingly important in reducing demand for fossil fuels and mitigating climate change over the next decade.

Patrick De Haan, head of oil analysis at GasBuddy, a company that tracks gas prices, said he expects the national average price of regular gas to stay below $4 a gallon this summer. He estimated that consumers will spend $1.6 billion less on gasoline over Memorial Day weekend than they did last year. The Department of Energy recently estimated that the national average price for gasoline this summer will be $3.40 a gallon, about 20% lower than last year.

Of course, there are also differences in state gas taxes, real estate, labor, and other expenses, and prices vary greatly from country to country. The Energy Department estimates that the average price of gasoline on the West Coast this summer will be $4.30 a gallon, about 90 cents above the national average.

Gasoline prices are usually highest from April to September when car driving increases. In addition, summer gasoline tends to be more expensive to produce as pollution regulations require different formulations.

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