Gasoline prices may have peaked for the summer and are now heading towards $4 per gallon, but all bets are off if there’s a hurricane or other disruption that sends oil prices much higher or crimps fuel supplies.
The national average for unleaded gasoline was $4.467 per gallon Wednesday, after steadily declining from a high of $5.01 nationally on June 14, according to AAA. Weekly data on gasoline demand from the Energy Information Administration (EIA) suggests drivers have cut back on gasoline use, and tight supplies are improving.
“I spoke to three big chain retailers…They all said of demand in the last three weeks, we’re down 5% or 6% from the same weeks last year,” said Tom Kloza, head of global energy research at OPIS.
“The most common price in the country starts with a 3 handle. $3.99,” he said. That’s the price some big chains are charging in areas with lower gas prices, and analysts say there’s a psychological draw to sub-$4 gasoline.
Prices vary widely across the U.S., with drivers in Georgia, for instance, paying a relatively low $3.98 per gallon, while Californians are paying $5.84 for a gallon of unleaded, according to AAA.
Clearly, the high prices have hit demand from drivers, but there also may be other factors at work, analysts say.
“I think it’s a combination of Covid and the continuing of work from home,” said Kloza. Concerns about a recession have also kept a lid on oil prices. But Kloza cautions, gasoline prices could surge back to $5 later this year on any number of factors.
For one, Europe is expected to move away from using Russian oil by the end of the year, and analysts are concerned that could put upward pressure on the prices of both crude and fuel.
“If there are no incidents, issues with refineries in terms of breakdowns or hurricane then yes,” gasoline prices will head lower, Kloza said. “Crude oil stocks are about 152 million barrels behind last year. You could see crude prices take off, or maybe not. I don’t regard this as a coast is clear, but you’ll get plenty of people who do.”
Not since the 1970s have consumers been hammered with climbing energy prices at the same time prices for other goods and services have risen sharply. Energy inflation accounted for nearly half the 9.1% rise in June’s consumer price index.
“With these higher prices across the board, people are being hit left, right and center. Discretionary driving has just been tabled for now,” said John Kilduff, partner with Again Capital.
Oil prices are a big factor in gasoline prices, and crude has crept back up lately after West Texas Intermediate crude fell into the low $90s per barrel this month. WTI futures were at $103.45 per barrel Wednesday afternoon, down about 0.7%, on the weekly report of lower gasoline demand.
According to the EIA, gasoline demand was 8.5 million barrels per day last week, up from 8.1 million barrels a day the week before. Meanwhile, the four-week average was 8.7 million barrels per day, off from 9.3 million barrels per day a…
Read More: Gasoline prices may have hit summer peak and could be headed below $4