US gas prices down for holiday
HOUSTON: Americans who filled up their cars over the long Memorial Day weekend were expected to catch a break — at least compared with a year ago, when gasoline prices were soaring.
The national average price for regular gasoline was a full dollar 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. Last week, they paid just over $3.50 a gallon for regular gasoline, according to AAA, the motor club.
Many energy experts said they expected prices to stay around these levels for much of the summer, barring a major disruption to global oil supplies.
Because gasoline prices are posted on street corners on big colourful signs, they can have a powerful psychological impact on consumers, especially on middle- and lower-income people who tend to drive older, less fuel-efficient vehicles and spend a larger proportion of their income on energy than affluent people.
“Who wouldn’t be happy to save the money?” said Eddie White, 46, who uses his pickup truck to make deliveries and offer rides through Uber. Filling up at least once a day, White, who lives in the Houston area, said he was saving roughly $420 a week. He is using that money to pay for classes that will help him become an insurance adjuster.
Aaron Hawkins, 22, manages a phone store and serves in the Army Reserve. His Reserve duties require him to drive regularly between Houston and Baton Rouge, Louisiana. He said he was saving between $150 and $200 a month on gas.
“It’s a lot better for everyone,” he said of the lower prices.
Prices spiked last year after Russia invaded Ukraine in February. Oil traders had expected Russian exports to fall because of the sanctions imposed on the country by the United States and its allies in response to the invasion.
The war is still grinding on, but Russia has found a way to keep selling its oil, though at heavily discounted prices, primarily to China and India. As a result, global oil supplies remain plentiful. It also helped that the United States and other industrialised countries released oil from their strategic reserves when prices were surging.
GAS DEMAND CLIMBS
At the same time, demand has not shot up for oil and the fuels produced from it. In the United States, use of motor fuels has not changed much from last year and has yet to recover to pre-pandemic levels. But that may be starting to change. Gasoline demand climbed over the last month, and AAA predicts a 7% increase in holiday weekend travel from last year.
Because supply was stronger and demand was weaker than many traders and analysts had expected, the US benchmark oil price gradually fell from around $120 a barrel last summer to around $73 a barrel on Friday.
Prices briefly spiked last month after Saudi Arabia, Russia and other major oil producers announced that they would cut production by 1.1 million barrels a day, or slightly more than 1% of global supplies.
But that rally sputtered out, and oil prices have been falling in recent weeks. Many traders are increasingly concerned that the Federal Reserve’s interest rate increases, designed to bring down inflation, will slow the economy and might cause a recession. Central banks in Europe are also pursuing similar policies.
Fears of a recession have also grown in recent weeks because of the halting debt ceiling negotiations between President Joe 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 put a damper on oil prices, according to a report by the Eurasia Group, a research and consulting firm.
Patrick De Haan, the head of petroleum analysis for GasBuddy, a company that tracks gas prices, said he expected the national average price for regular gas to stay under $4 a gallon this summer. He estimated that consumers would spend $1.6 billion less than last year on gasoline over Memorial Day weekend. The Energy Department recently estimated that the average national price for gasoline this summer would be $3.40 a gallon, about 20% lower than last year.
Of course, prices vary widely across the country, in part because of the differences in state gas taxes and the cost of real estate, labour and other expenses. The Energy Department estimated that the average price of gasoline on the West Coast would be $4.30 a gallon this summer, about 90 cents above the national average.
Gasoline prices are typically highest between April and September, when people drive more. In addition, summer-grade gasoline tends to be more expensive to produce because pollution regulations require that it be blended differently.