US on ‘cusp’ of falling gas prices
by Tobias Burns and Rachel Frazin - 07/06/22 4:17 PM ET
Gasoline futures fell more than 10 percent Tuesday and are down more than 22 percent since June, raising hopes that the high price of gas across the country might soon fall.
The price of U.S. crude oil fell more than 8 percent and international benchmark Brent crude fell nearly 10 percent on Tuesday.
“We’re on the cusp of seeing more savings,” said Patrick De Haan, head of petroleum analysis at gas price tracking site GasBuddy. “I’m trying to be a little bit optimistic here that this relief could make its entire way to the pump in the weeks ahead.”
The national average for a gallon of gasoline now stands at $4.78, according to AAA, down from a recent peak above $5 per gallon. A year ago, the national average was only $3.13, representing a 50 percent year-over-year spike in the price of gas.
And any drop in gasoline prices may also provide some political respite for the Biden administration, since even though presidents have little control over gasoline prices, they still face blame from voters and their political foes.
The price of U.S. crude oil was hovering around $98 per barrel on Wednesday afternoon, down from about $108 late last week. Brent crude fell to about $101 per barrel, down from about $111 late last week.
Earlier Wednesday, Brent prices briefly dipped below $100, the first time since April prices have been under $100 for the commodity.
Experts said they expect this trend to result in drops at the pump.
Marianne Kah, an adjunct senior research scholar at Columbia University’s Center on Global Energy Policy, said she expects the current drop in crude oil prices to translate to about a 12 percent decline — or about 60 cents — in gasoline prices from their peak level last month.
“We’re talking about 60 cents a gallon,” said Kah, who is also the former chief economist at oil company ConocoPhillips. “Now, of course it takes time to have the crude price flow through to the gasoline price.”
Meanwhile, De Haan said he thinks consumers could see another decline in the coming weeks ranging from an additional 40 cents to an additional 65 cents if the situation otherwise remains the same.
“The average price per gallon could fall 40 to 65 cents over the coming weeks,” he said, adding that the drop could be over a three- to six-week period.
“Stations are getting lower prices already,” he added. “Prices could go down a penny or two every day or two for the next six weeks as long as nothing changes.”
Experts say the decline is a double-edged sword, since the cheaper price isn’t due to any real changes on the supply side but rather to consumers scaling back their expenses and pulling down the expectation of demand.
“I think you’ll see gas prices come down,” Phil Flynn, energy markets analyst with the PRICE Futures Group, said in an interview with The Hill.
“We’re starting to see from the consumers, instead of paying $5 a gallon, they’re paying $4.80 a gallon — and isn’t that wonderful — but it’s also because they don’t have as much money in their pockets, and they’re not going out to dinner and to eat, so what we’re seeing is a pullback in demand. And that’s because people are feeling the pain of higher prices.”
But Kah also said there are still factors that could increase energy prices in the coming months, including if Russia decreases its oil production or if China’s demand grows.
Meanwhile, major banks this week are out with vastly different outlooks on the future of oil prices.
JPMorgan predicted that prices could rise as high as $380 a barrel in “the most extreme scenario” if Russia reduces its output.
Citibank projected that if a recession hits, oil prices could fall to $65 per barrel this year and $45 per barrel next year.
“It just highlights the volatility and just even the difference in thinking,” De Haan said. “We just don’t know how things will play out. We still have an active hurricane season. The economy’s not too bad, even amidst recession fears. The jobs market is still very strong.”
But analysts agree that the current price drops are largely due to recession fears.
more
https://thehill.com/policy/3547968-us-on-cusp-of-falling-gas-prices/
