The average gas price is approaching $ 4 a gallon nationwide, part of a nearly 60-day drop from unprecedented highs earlier this year.
However, experts say Mother Nature could push prices up quickly as hurricane season on the Gulf Coast picks up.
As of Wednesday, the national average for a gallon of gas was $ 4,163, the latest in a 50-day drop, according to data from AAA. Numerous states, mainly in the Southeastern United States, are already below $ 4, with the lowest average prices – $ 3,667 – in Texas.
The decline follows a period earlier this year where average prices hit an all-time high of $ 5 in June, according to data compiled by GasBuddy. A number of atypical factors, from the Russian invasion of Ukraine to pent-up demand with the end of pandemic restrictions, contributed to the spike in prices. The factors that push it back can also be difficult to predict.
Patrick De Haan, head of oil analysis at GasBuddy, noted that much of the recent decline is likely linked to fears of an economic downturn. “Market oil prices are reflecting the growing risk that if we see a recession, oil consumption will be lower,” De Haan said.
However, he added, “Not only that, we have seen an increase in gasoline stocks in the last six weeks or so. And this is perhaps also contributing in part to the decline. ”
Devin Gladden, AAA National’s federal affairs manager, said the US gas market was “roughly in line” with what it was before the pandemic caused demand slump, aside from some spikes over the holidays. early 2020.
Gladden described the downtrend as “a strange case where it is pretty much the same as when we saw the severe COVID precautions and these factors are driving prices to keep falling.”
Meanwhile, he added, recession anxiety is “having an impact on oil prices, in particular, because there is concern that if economic growth stalls or we enter a recession … this could potentially have an impact on global crude oil demand “.
“That’s why the market is worried, because when demand falls, prices typically follow, and so they’re protecting themselves from potentially lower prices,” he added.
President Biden, who saw gas prices slash his approvals, took a victory lap on Wednesday, tweeting“More than half of all gas stations in the United States now offer gasoline for less than $ 4 a gallon.”
The administration has often stressed the role played by the invasion of Ukraine in price increases, calling it “Putin’s price hike”, as well as criticizing the oil industry for the number of unused leases it currently owns on federal land. .
However, De Haan said a number of factors could lead to a price rebound.
“The underlying question is: Will Mother Nature blow up a Category 4 or Category 5 hurricane in the Gulf of Mexico?” De Haan said. Gulf hurricanes have “over and over” taken platforms and refineries out of service for four to six weeks, she noted.
Gladden was more optimistic about the dangers of hurricane season, saying the industry “hopes for the best during hurricane season, but of course we are prepared”.
However, he added, “the thing to remember is that even the threat of a hurricane can cause the shutdown of crude oil production, particularly on the Gulf Coast. And therefore even only stops or preventive measures can also limit the supply and cause an increase in prices “.
Another factor that could cause prices to rise again, De Haan noted, is the relative lack of action by OPEC to increase supply.
On Wednesday, OPEC announced it will only slightly increase production, with 100,000 more barrels per day. The announcement came shortly after Biden met with Saudi Crown Prince Mohamed bin Salman and asked for help from the kingdom to stabilize global oil markets.
There is also the possibility that fears of a recession will not materialize.
“If we don’t see an economic slowdown and we see better economic news, we could see oil prices go up again,” De Haan said. Meanwhile, he added, diesel supplies could also take a hit between fall and winter as demand increases.
“As agricultural consumption rises and people start filling their tanks with heating oil, diesel could see pretty doomsday numbers by the end of the year if things don’t go well,” he said.
However, over the same period, the downward trend is likely to persist on the gas side of the equation, De Haan said.
“Gasoline could see lower prices in the fall if we can avoid things like hurricanes or other unexpected outages with refineries and things like that.”