Silver lining of variant: Gas prices could drop
There’s a silver lining to the bummer news that dropped, along with the stock market, about the new omicron variant on Black Friday:
Oil prices, which fell along with stock prices, failed to recover Monday and could remain low enough to bring consumers relief at gas pumps, travel club AAA said in its weekly gas price update.
The drop in oil prices, triggered by fears that the new variant will throttle economic activity around the globe over the coming months, could shave 20 to 25 cents a gallon off the current $3.34 per-gallon average price of unleaded regular, AAA spokesman Mark Jenkins said.
The price of U.S. crude oil fell 13% on Friday, closing at $68.15 a barrel — its lowest price since Sept. 9. On Monday, it settled at $69.95 and had fallen further to $67.62 on Tuesday.
That’s a big drop compared to just a few weeks ago. Crude reached $77 a barrel Nov. 9, and gas prices followed suit, climbing to an average $3.36 a gallon in Florida just before Thanksgiving.
Jenkins warned consumers not to expect prices to drop overnight, though.
“Gas prices normally rise like a rocket and fall like a feather,” Jenkins said. “So it could take a couple of weeks before prices at the pump fully reflect the downturn in the futures market.”
Patrick De Haan, head of petroleum analysis for the price-comparison website Gasbuddy.com, said the return of travel restrictions in many nations would reduce demand for fuel and ease supply pressures that have been driving prices to levels not seen in seven years.
Of course, oil prices could stage a comeback if the threat from the omicron variant fails to materialize.
For now, the jury is still out on how the variant will affect demand for oil and gas, De Haan said.
“But so far, Americans can expect the new variant to push gas prices even lower. Beyond the next few weeks, it remains nearly impossible to predict where oil and gas prices will head, though turbulence is guaranteed.”
The recent pickup in inflation, including the increase in gas prices, has caught business leaders and economists around the world by surprise.
In spring 2020, the coronavirus crushed the global economy: governments ordered lockdowns, businesses closed or slashed hours and families stayed home. Companies braced for the worst, canceling orders and putting off investments.
In an attempt to stave off economic catastrophe, wealthy countries — most notably the United States — introduced trillions of dollars worth of government aid, an economic mobilization on a scale unseen since World War II. Central banks also slashed interest rates in a bid to revive economic activity.
But those efforts to jump-start economies have had unintended consequences: as consumers felt more emboldened to spend the money they had received through government assistance or low-interest borrowing, and vaccine rollouts encouraged people to return to restaurants, bars and shops, the surge in demand tested the capacity of suppliers to keep pace.