US gasoline prices have fallen from historic highs earlier in the summer, a fall highlighted by a politically beleaguered White House as a sign of slowing inflation.
President Joe Biden, who saw his approval rating slip amid the worst price pressure in decades, pointed out on Twitter that prices at the pump have been falling for more than a month, saving the average driver about $25 a month.
“I know those extra dollars and cents mean something. There’s room to breathe,” Biden tweeted Monday night. “And we’re not done dropping prices even more.”
Since hitting an all-time high of $5.016 a gallon on June 14, prices have fallen over the past 35 days amid mounting worries about economic growth and an easing in the physical crude oil market.
According to the American Automobile Association, gasoline prices now average $4,495 a gallon nationally, down 10 percent from the previous month but up 42 percent from last year’s levels.
The biggest factor in the pullback was the fall in crude oil prices on fears that a slowing economy or recession could hurt energy demand.
Crude oil prices rose to around $130 a barrel shortly after the Russian invasion of Ukraine raised fears of losing a key source of supply at a time of rising demand.
Analysts say those fears have generally not materialized and most Russian crude has continued to flow to buyers in markets like India and China.
US crude oil production is also up about 400,000 barrels a day compared to March, according to US data.
The extra US production, coupled with more Saudi oil added recently, means that the tightness in the crude oil market “has eased,” said Again Capital’s John Kilduff, who also commented on the unusually tepid gas consumption reported in the recent Weekly newspaper as factor cited US energy report.
Part of the drop in gas mileage is probably a price reaction. But it also reflects changing work practices in the wake of the pandemic.
“Until the pandemic, working from home was considered an outlier,” says Bill O’Grady, chief market strategist at Confluence Investment Management.
Under today’s more flexible regulations, “if the price of gas goes up, you can come three or two days a week instead of five days a week,” O’Grady said.
– Will prices continue to fall? –
A White House memo predicted that gasoline prices would fall further “in the short term” and highlighted Biden’s actions as a historically large release of oil from the Strategic Petroleum Reserve – which analysts believe will have its main impact once announced End of March.
The White House memo also noted that the fall in gasoline prices has received only a fraction of the media coverage that the rise in prices received earlier in the spring.
“Despite the data, you wouldn’t know gas prices were falling just by watching the evening news or reading the newspaper,” the memo said.
Kilduff also expects gasoline prices to continue falling, noting a long-standing seasonal trend that typically results in a fall in gasoline prices after July 4th.
“My prediction is that prices will continue to fall into the fall,” Kilduff said, adding that prices will remain high by historical standards.
While O’Grady expects prices to fall further, he added that there is always a risk in late summer that hurricanes in the Gulf of Mexico could affect key refineries.
“That can drive up gas prices significantly,” he said.
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