Gas prices eventually dipped below $5. But don’t expect them to stay there
The average gasoline price fell, after spending most of the week at $5 a gallon or higher. The national average fell to $4.98 a gallon on Sunday and stayed there on Monday, according to AAA data.
Part of this is due to demand destruction, when the price of fuel is so high that motorists rethink filling their tanks. According to AAA, gasoline demand fell slightly last week from 9.2 million barrels per day to 9.09 million, helping to restrain prices.
“However, as crude oil prices remain volatile, the price per gallon of gasoline is likely to remain elevated,” the organization said in a statement Friday.
Crude oil prices, now nearing $115 a barrel, represent 60% of the price of regular unleaded gasoline. The price of crude could hit $150 a barrel by the end of September, Foreign Policy reported in June.
Analysts predict pump prices will rise again. According to University of Houston economist Ed Hirs, the national average will likely hit $6 a gallon by Labor Day.
Here’s what you need to know about gas prices, including how high they could go, what the White House is doing to turn the tide and how you can save money when you fill up.
Why is gas so expensive?
Russia continuesis an obvious factor. The price of gas is inextricably linked to the cost of crude oil, from which it is refined. Every $10 increase in the cost of a barrel of crude adds nearly 25 cents to the price of a gallon of gasoline.
According to the White House, the war pushed gasoline prices up more than $1.70 a gallon.
Although the United States does not import a lot of crude from Russia, oil is traded on a global market and any changes affect prices all over the world.
Crude oil prices could hit $150 a barrel by the fall, Foreign Policy reported. And, according to new data from the Energy Information Administration, total domestic gasoline supply is falling: in the week of July 13, it fell 700,000 barrels to 217.5 trillion.
But the Russian invasion is not the only factor: even though demand is approaching pre-pandemic levels, producers are still hesitant to increase production. In April, OPEC missed its target to increase production by 2.7 million barrels per day.
“We’ve had an imbalance between supply and demand for some time,” Troy Vincent, senior market analyst at energy analytics firm DTN, told CNET. “And he will remain, whether this conflict goes away or not.”
President Joe Biden has also accused oil companies of profiting from the crisis.
“In the midst of a war that has driven gasoline prices more than $1.70 a gallon, historically high refinery profit margins are compounding that pain,” Biden wrote in a June 15 letter to executives. from Exxon Mobil, Chevron, Shell, Phillips 66, BP and other companies. .
“I understand that many factors contributed to the business decisions to reduce refining capacity, which took place before I took office,” he added. “But in wartime, well above normal refinery profit margins passed directly to American families are not acceptable.”
Additionally, during the summer months, gasoline is reformulated to prevent excessive evaporation caused by higher outside temperatures. The most expensive summer gasoline blend can add between 7 and 10 cents per gallon.
How high will gasoline prices go?
The week of June 13, gasoline averaged $5.02 a gallon – a record high, but adjusted for inflation, still below the 2008 peak of $4.14, which would be d about $5.37 now.
Yet experts don’t believe we’ve seen the end of rising gasoline prices.
“This dynamic between reduced supply and increased demand is contributing to higher pump prices,” AAA said in a June 13 statement. “Coupled with rising crude oil prices, this means the price of gas is likely to remain high for the foreseeable future.
With expectations of strong driving demand through Labor Day, Hirs said the price of gas will hit $6 by September, thanks to reduced U.S. refining capacity and increased demand for domestic oil on foreign markets.
Natasha Kaneva, head of commodities research at JPMorgan, is even more pessimistic: In a May report, Kaneva said the price could climb to $6.20 a gallon as early as August, Insider reported.
What is the government doing to lower the price of gasoline?
In the June 15 letter, Biden called on oil companies to work with his administration to address any production cuts as well as “inventory, price and refining capacity issues.”
He previously criticized them for sitting on more than 12 million acres of federal land approved for drilling and 9,000 production permits. The administration has said it wants oil companies to pay fines for leaving leases unused.
In April, the Environmental Protection Agency approved the year-round sale of E15 gasoline, a cheaper fuel that contains 15% corn ethanol. The impact will be modest, as only about 2,500 of the country’s more than 100,000 gas stations sell the high-ethanol biofuel.
In March, the White House began releasing one million barrels of oil per day from the US Strategic Petroleum Reserve. The unprecedented pullback, which is expected to last six months, could lower gasoline prices between 10 and 35 cents per gallon.
Texas-based oil company Pioneer Natural Resources chief executive Scott Sheffield told The New York Times in March: “It will bring the price of oil down a bit and encourage more demand. But it’s still a band-aid on a significant supply shortfall.”
The United States is also considering obtaining energy products from other sources: the Biden administration is improving diplomatic relations with Venezuela, which has been banned from selling oil to the United States since 2018, and is negotiating another treaty of no – nuclear proliferation with Iran, which could bring back Iranian oil to the market.
Individually, Connecticut, Maryland, New York, Florida and Georgiato help consumers, and at least 20 other states are considering similar measures.
There is also a bill in Congress that would suspend the federal fuel tax, although it is facing stiff opposition. Biden said he hopes to decide whether or not to support a federal gas tax holiday by the end of the week. The president cannot declare a holiday unilaterally, but he could pressure lawmakers to pass the measure.
How can drivers save at the gas station?
Drivers can cut back on non-essential trips and shop around for the best price, even crossing state lines if it’s convenient for them.
Apps likefind the best gas prices in your area. Others, like , track your car’s gas mileage and can help determine if it’s getting decent fuel economy. Additionally, many gas station chains have loyalty programs and that offer cash back on gas purchases.
DTN’s Vincent advises against gas hoarding or other extreme measures, but encourages more budgeting for gas. High energy prices have been a major contributor to inflation for some time, he said, and are not going away immediately.
“When the cost of crude goes up, pump prices tend to reflect that very quickly,” he said. “But gas prices tend to linger longer, even when crude drops.”