US gasoline prices have fallen from historic highs earlier in the summer, a retreat highlighted by a politically beset White House as a sign of moderating inflation.
President Joe Biden, who has seen his approval rating tumble amid the worst pricing pressures in decades, took to Twitter to point out that prices at the pump have fallen for more than a month, saving the average driver about $25 a month.
“I know those extra dollars and cents mean something. It’s breathing room,” Biden tweeted Monday night. “And we’re not done working to get prices even lower.”
Since hitting an all-time high of $5.016 a gallon on June 14, prices have fallen the last 35 days amid rising worries over economic growth and an easing in the physical crude oil market.
Gasoline prices are now at a national average of $4.495 per gallon, down 10 percent from a month ago but up 42 percent from the year-ago level, according to the American Automobile Association.
The biggest factor in the pullback has been the drop in crude oil prices due to worries that a slowing economy or recession will dent energy demand.
Crude prices rose to around $130 a barrel soon after the Russian invasion of Ukraine prompted fears of the loss of a major supply source at a time of rising demands.
Analysts say those fears were generally not realized and that most Russian crude oil has continued to flow to buyers in markets such as India and China.
Compared with March, US crude oil production has also risen about 400,000 barrels a day, according to US data.
The added US production, coupled with more Saudi oil added in the recent period, means the tightness of the crude market “has eased,” said Again Capital’s John Kilduff, who also cited as a factor unusually tepid gasoline consumption shown in the most recent weekly US energy report.
Some of the drop in gasoline use likely is a response to price. But it also reflects shifting labor practices after the pandemic.
“Up until the pandemic, work from home was kind of considered an outlier,” said Bill O’Grady, chief market strategist of Confluence Investment Management.
Under today’s more flexible arrangements, “when the gasoline price goes up, instead of coming in five days a week, you may only come in three or two,” O’Grady said.
Will prices keep falling?
A White House memo predicted gasoline prices would continue to fall through the “near term,” highlighting Biden’s actions such as a historically large release of oil from the Strategic Petroleum Reserve—which analysts think had its primary impact as soon as it was announced in late March.
The White House memo also noted that the decline in gasoline prices has gotten a fraction of the media coverage that the run-up in prices earlier in the spring received.
“Despite the data, you wouldn’t know gas prices are coming down from watching the evening news or reading the paper,” the memo said.
Kilduff also expects gasoline prices to fall further, noting a long-running seasonal trend that typically sees gasoline prices retreat after July 4.
“My forecast is for prices to continue to slide lower into the fall,” Kilduff said, adding that prices will remain high by historical standards.
While O’Grady thinks prices will continue to fall, he added that there is always a risk in late summer that Gulf of Mexico hurricanes could impair key refineries.
“That can send gasoline prices up significantly,” he said.
