11 August (Reuters) For the first time in months, the average price of retail gasoline in the United States dropped below $4 a gallon on Thursday, providing some respite to motorists in the country that consumes the most gasoline globally. According to the American Automobile Association, the national average price for normal unleaded gasoline dropped to $3.990 per gallon on Thursday.
Gasoline prices reached a record high of $5.02 in June, hurting consumers’ wallets and prompting them to purchase less fuel in July than they did in July 2020 during the pandemic. The most recent price reduction would support Democrats in Congress and the administration of President Joe Biden in November’s midterm elections. Following Russia’s invasion of Ukraine, the White House has taken a number of measures to lower oil prices. Even though people were “still struggling,” according to Biden, inflation was beginning to moderate.
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Crude oil, the primary factor influencing the price of gasoline, once hit $139 a barrel; it was at $98 on Thursday. Prices have decreased as market concerns about severe supply limits have diminished. More than 180 million barrels of crude oil are being released by the White House from the US Strategic Petroleum Reserve. To reach 12.2 million bpd this year, the U.S. oil output increased by roughly 500,000 barrels per day (bpd).
According to EIA data, the total amount of gasoline product delivered over the last four weeks has decreased by 6.3% compared to the same period last year, a proxy for demand. Data from the most recent week revealed that demand had increased since July, which experts took as an indication that demand will increase as a result of the recent drop in prices. Gasoline product supply for the four weeks that concluded on July 29 was 8.59 million bpd as opposed to 8.72 million bpd in July 2020. According to Matt Smith, head oil analyst for the Americas at Kpler,
“when you look at gas prices breaching below the $4 mark on the national average, perhaps any impact of demand destruction has been temporary and possibly in the rearview mirror.” Although they were pleased to see costs drop, consumers who had just been interviewed stated they were still being careful when making purchases. Kevin Williams, a U.S. Postal Service employee who was filling up his tank in Atlanta on Wednesday, said, “They’re coming down but not nearly enough.” “Even with prices down, filling up still costs me $50–$60. It was $30 in the past. Demand could increase in the coming months with prices at lower levels due to the continued strength of job growth.
On earnings calls last week, executives from the refining industry expressed optimism about consumption for the remainder of 2022. While retail sales are down just over 20%, gasoline futures are down 27% from their June highs. Some states, like Ohio, where prices are down 27% from their peak, have experienced more respite. As the summer driving season winds down, gas costs tend to decline.
The U.S. Treasury Department said in July that the SPR release, combined with releases by IAEA members, reduced the price of gasoline by 17 cents to 42 cents per gallon, while it acknowledged that it was difficult to determine the exact impact. Low-income Americans have benefited from the price decline. According to Bank of America, average gasoline consumption as a percentage of total credit card spending per household for lower-income households dropped to 9.3% in July from a peak of almost 10% in June.
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Inflation predictions among American consumers for the next year and three years plunged last month. Despite being flat in July due to the strong decline in energy prices, consumer inflation is still up 8.5% from a year ago. Despite just having half a tank, Kelly Ferrel, an Atlanta saleswoman, said, “I wanted to fill up now while the prices are favourable.” On Wednesday, petrol cost $3.45 per gallon in her city. “I wish they will lower themselves more. Because the previous jump “did not result in significant demand destruction to end the current, unsustainable gap,” Goldman Sachs analysts predict that crude could rise later this year.
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