Gas now cheaper than a year ago

After months in which gasoline prices in the United States have been one of the most visible symbols of inflation, they have a new distinction: Prices at the pump are now lower than they were a year ago. The reversal of the price escalation that accompanied Russia’s invasion of Ukraine will ease pressure on U.S. consumers dealing with the high cost of other essentials.

The drop in gasoline prices was led by a decline in worldwide energy demand, which drove oil prices lower. The national average price for regular gasoline stood at $3.33 a gallon on Thursday, according to AAA. A year ago, the average price at the pump was $3.34.

At their peak, gasoline prices were just over $5 a gallon in mid-June. The price of West Texas Intermediate crude oil, the U.S. benchmark that serves as the main driver of gas prices, on Thursday fell to its lowest level of the year, crossing below $72 per barrel, after trading above $120 in March and June.

The drop is a political boon for the Biden administration, which has been drawing down the nation’s Strategic Petroleum Reserve since the spring in an effort to keep prices contained.

Although gasoline prices have fallen from recent peaks, they are still higher than they were throughout the past several years. Along with elevated oil and natural gas prices, this has powered a series of record-breaking quarterly profits at energy companies like Exxon Mobil and Chevron. The net income of global oil and gas producers is set to double this year, to an “unprecedented” $4 trillion, the International Energy Agency said in a recent report.

President Joe Biden has criticized energy companies for “profiteering” and threatened them with a new windfall profits tax, a policy already in place in some other parts of the world, unless they increased production. His administration has been highlighting the price declines on social media.

Falling gasoline prices might be welcome news for the Federal Reserve, too, as it tries to curb inflation by raising interest rates and slowing down the economy. Still, the economic implications could be complicated. As consumers spend less on gasoline, they have more cash for other purchases.

“It’s good for households and it’s good for affordability,” said Beth Ann Bovino, the U.S. chief economist at the financial analysis firm S&P Global. “But at the same time the easing up of pricing pressure at the gas pump leaves more money to spend elsewhere, that might give a near-term boost to inflation, which the Fed would have to fight.”

The gasoline price trend has not been matched by diesel, a fuel essential to industry, agriculture and transporting goods. U.S. diesel prices have fallen in recent weeks, but are roughly 40 percent higher than a year ago, partly because of disruptions to Europe’s supplies.

While the decline in gasoline prices has been widely felt, some states still have prices well above the national average. In California, which has high gasoline taxes and rigorous emissions standards that increase the cost of refining, the average price of regular gasoline was $4.62 a gallon on Thursday, down from $6.44 in June. In several Southern and Midwestern states, however, prices are below $3 a gallon, mainly because they have minimal gasoline taxes, if any, and demand is lower in rural areas, according to Devin Gladden, an AAA spokesman.

Global oil prices account for more than half the cost of gasoline. The prices of both West Texas Intermediate and Brent crude, the global benchmark, have fallen more than 20 percent since late August.