Falling Gasoline Prices: Experts Warn Consumers to Be Careful

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Gas prices have fallen for 28 consecutive days, but experts are cautious about the future.  (AP Photo/Ashley Landis)

Gas prices have fallen for 28 consecutive days, but experts are cautious about the future. (AP Photo/Ashley Landis)

PA

Gasoline prices are finally falling from their records, but will it last?

The answer so far is not too clear.

For the 28th consecutive day, prices at the pump have fallen Tuesday July 12, when the national average hit $4.66 a gallon, down 36 cents from June record of $5.01 per gallon, according to AAA data.

Oil prices, too, are starting to fall. On July 12, the price of a barrel of oil soaked below $100 for the first time since May 10, according to the Wall Street Journal.

Before planning a cross-country road trip in a gas-guzzling car, experts warn the trend may not continue in the coming weeks.

What’s going on with the gas?

In 2020, at the start of the pandemic, gas and oil prices fell. However, as the economy recovered and inflation rose, gasoline prices did more than catch up: they soared to record highs.

Last month, gasoline prices across the country averaged over $5 a gallonan absolute record.

Since mid-June, however, prices have been on a downward trend, steadily falling.

According to latest press release from AAA on July 11, the 10 largest weekly declines in gasoline prices occurred in Texas, Ohio, Illinois, California, Wisconsin, Indiana, Kentucky, Alabama, Virginia and Florida.

The cheapest markets in the United States are South Carolina, Georgia, Mississippi, Louisiana, Texas, Alabama, Arkansas, Tennessee, North Carolina and Kentucky.

South Carolina, Georgia and Mississippi had the lowest average price at $4.18 per gallon at press time.

But while gas prices have fallen for a number of reasons, they could rebound in the near future, analysts warn.

What determines gas prices?

The price of gasoline that consumers see at the pump is largely determined by the price of crude oil, the primary ingredient in the gasoline that goes into vehicles.

Oil prices have been rising for months as the economy simultaneously rebounded from the coronavirus pandemic crisis. When Russia invaded Ukraine, things only got worse as investors panicked. Due to this perfect storm, oil prices soared, driving retail gasoline prices.

Like Clifford Atiyeh reported for Car and Driver, between the Russian-Ukrainian war, inflationary pressures, changing interest rates and persistent supply and demand problems, “it was another unpredictable year, to put it lightly” .

Gas, like all other goods and services, is also influenced by supply and demand.

For example, at the start of the pandemic, when oil and gas supply was still high but gas demand all but disappeared as people stayed home, the price fell.

Analysts are noticing a similar trend now.

As oil prices continue to decline, gas demand has remained abnormally low, according to the US Energy Information Administration. Data from the organization’s weekly State of Oil report indicates that gas consumption in the United States during the second quarter of 2022 and early July is less than the same period in 2021. A similar trend appeared in the monthly supply data.

A combination of oil prices and demand is determining gas prices at present. In the United States, people don’t use as much gas as usual. The price of oil is falling. Together, these two influences work together within the economy, creating the right balance to drive down gasoline prices.

What to expect in the coming weeks

Analysts are conflicted over what the future might bring for gas prices, Patrick De Haan, head of oil analysis at GasBuddy, told McClatchy News.

“Is it going to last? I guess that’s anyone’s best guess given the volatility in the market,” De Haan said. “There are no guarantees.”

Some analysts are more optimistic.

Trilby Lundberg, an industry analyst with the Lundberg Survey, said in a statement to The Associated Press that “assuming oil prices do not rise from here, motorists could see prices drop another 10 to 20 cents as oil price declines continue to reverberate to the street level.

And Mark Schieldrop of AAA Northeast told the Boston Herald that “it’s nice to see the relief coming to motorists, and we expect this trend to continue.

“If oil falls below $100 and stays there, we could see gasoline prices move closer and closer to $4,” he told the paper.

The uncertainty within the market extends to banks, which also issue very different forecasts for the future of oil and gas prices.

CitiBank, for example, said last week that oil prices could fall to $65 a barrel by the end of the year if the economy goes into recession, according to Bloomberg. Meanwhile, JPMorgan is ‘stratospheric’ oil price warning hitting $380 a barrel, Bloomberg reported.

The uncertainty within the market is certainly high, but there is a similarity between each perspective, according to De Haan.

“The only underlying common denominator here is that volatility could lead us to dramatically different outcomes,” he said.

Several factors over the coming weeks and months will dictate how gasoline prices move, including weather at the start of hurricane season, policy changes in the United States, upcoming index data consumer prices and the results of the second-quarter earnings reports of the world’s largest companies, De Haan said.

This story was originally published July 13, 2022 8:03 a.m.

Moira Ritter covers real-time news for McClatchy. She graduated from Georgetown University where she studied government, journalism and German. Previously, she reported for CNN Business.

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