Americans fueling cars this Memorial Day weekend will take a breather — at least from a year ago, when gas prices soared.
The national average price for regular gasoline is $1 a gallon lower than a year ago. Drivers paid over $4.60 in May 2022 and prices had reached $5 by the second week of June. This week, they paid just over $3.50 a gallon for regular gasoline, according to AAA, the auto club.
Many energy experts have said they expect prices to stay around these levels for much of the summer unless there is a major disruption to global oil supplies.
Because gas prices are displayed on street corners on large, colorful signs, they can have a powerful psychological impact on consumers, especially middle and low income people who tend to drive older vehicles. and less fuel efficient and spend a greater proportion of their time. income on energy than wealthy people.
“Who wouldn’t be happy to save some money?” said Eddie White, 46, who uses his van to make deliveries and offer rides through Uber. Refueling at least once a day, Mr. White, who lives in the Houston area, said he was saving about $420 a week. He uses this money to pay for courses that will help him become an adjuster.
Aaron Hawkins, 22, runs a phone shop and serves in the Army Reserve. His reserve duties required him to drive regularly between Houston and Baton Rouge, Louisiana. He said he saves between $150 and $200 a month on gas.
“It’s much better for everyone,” he said of the lower prices.
Prices soared last year after Russia invaded Ukraine in February. Oil traders expected Russian exports to plummet due to sanctions imposed on the country by the United States and its allies in response to the invasion.
The war is still going on, but Russia has found a way to continue selling its oil, albeit at heavily discounted prices, mainly to China and India. As a result, global oil supplies remain plentiful. It also helped the United States and other industrialized countries release oil from their strategic reserves when prices rose.
At the same time, the demand for oil and fuels produced from it has not increased. In the United States, fuel use has not changed significantly from last year and has not yet recovered to pre-pandemic levels. But that may be starting to change. Gasoline demand has increased over the past month and AAA is forecasting a 7% increase in holiday weekend trips over last year.
Because supply was stronger and demand weaker than many traders and analysts had expected, the benchmark price for U.S. oil has gradually fallen from around $120 a barrel last summer to around $72. per barrel on Thursday.
Prices briefly spiked last month after Saudi Arabia, Russia and other major oil producers announced they would cut production by 1.1 million barrels a day, just over 1% global supplies.
But that rally has run out of steam and oil prices have fallen in recent weeks. Many traders are increasingly concerned that the Federal Reserve’s interest rate hikes, designed to lower inflation, could slow the economy and trigger a recession. Central banks in Europe are also pursuing similar policies.
Fears of a recession have also increased in recent weeks due to the stalling of debt ceiling negotiations between President Biden and House Republicans. Elsewhere, signs that China and India, the world’s most populous countries, are not buying as much fuel as expected have also dampened oil prices, according to a report by research firm Eurasia Group. and advice.
“Last year you had higher demand growth and lower supply growth,” said Linda Giesecke, demand analysis manager at ESAI Energy, a consultancy. “This year, demand and supply are relatively balanced.”
After nearly two years of battling high inflation, many Americans appear to have changed how and where they buy gasoline and diesel, said Tom Kloza, global head of energy analysis at the Oil Price Information Service. Many people have started buying fuel from big-box retailers, which often offer lower prices than independent gas stations.
“Costcos, BJs, Sam’s Clubs, Buc-ees, supermarkets, all took market share from 2020 to 2022, and they’re not giving it up,” Kloza said. “It’s harder for the little guy over there,” he added, referring to gas stations that use the brands of big oil companies like Exxon and Chevron, but are usually owned by families or small businesses.
Warehouse stores and other large retailers can offer lower prices because they negotiate the best deals with refiners and buy their gasoline in bulk.
Another factor holding back prices is the growing popularity of electric vehicles. Battery-powered vehicles could become increasingly important in reducing demand for fossil fuels and limiting climate change over the next decade.
Patrick De Haan, head of oil analysis for GasBuddy, a company that tracks gas prices, said he expects the national average price for regular gas to stay below $4 a gallon this summer. He estimated consumers would spend $1.6 billion less on gasoline than last year over Memorial Day weekend. The Department of Energy recently estimated that the national average price for gasoline this summer will be $3.40 per gallon, about 20% lower than last year.
Of course, prices vary widely across the country, in part due to differences in state gasoline taxes and the cost of real estate, labor and equipment. ‘other expenses. The Department of Energy has estimated that the average West Coast gasoline price will be $4.30 a gallon this summer, about 90 cents above the national average.
Gasoline prices are generally highest between April and September, when people drive more. Additionally, summer gasoline tends to be more expensive to produce because pollution regulations require it to be blended differently.