Gasoline prices continued their decline, falling to $3.99 on Aug. 9 and hitting lows in March – but market analysts say drivers aren’t out of the woods just yet.
The latest numbers mark the 55th straight day of declines. Giving drivers a break as high inflation rates have strained their budgets.
The national median price fell below $4 a gallon for the first time since early March, said Patrick De Haan, director of petroleum analysis at GasBuddy, the Boston-based provider of retail fuel price information.
“Americans are now spending almost $400 million less on gasoline every day than they were just over a month ago,” he said.
Gasoline prices fall from peak. But…
Gasoline prices have been falling steadily since peaking at $5.03 on June 14th. They are down more than $1 a gallon, reflecting the drop in crude oil prices.
Six states sell gasoline for $2.99 a gallon or less, but De Haan said the number of gas stations selling it at that price “is likely to decline in the coming days as wholesale oil and gasoline prices rise.” .
Six gas stations in Oklahoma sell gasoline at $2.99 a gallon, while five in Kansas and Louisiana, two in Texas and Iowa, and one in Ohio sell gasoline at that price.
“While the recent drop in gas prices has been warmly welcomed, the problems that have caused prices to skyrocket have not yet been fully resolved and could eventually see prices pick up again should anything unexpected develop,” he said.
Why crude oil prices are failing
Geopolitical tensions, fears of an imminent recession and unclear consumer demand have boosted crude oil prices, which have been range bound for the past few days.
Prices for WTI, the US oil benchmark, fell 0.36% to $90.37 on Aug. 9. On August 4, oil prices hit their lowest level since Russia invaded Ukraine in late February. WTI hit $88 a barrel while the international benchmark, Brent crude, fell to $95 a barrel.
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The declines reflected growing concerns about a possible recession and the prospect of a fall in demand.
Oil prices are volatile
OPEC’s stance, the ongoing war on Ukraine and EU sanctions on Russia all play a role in the outlook for crude prices, De Haan told TheStreet.
Crude oil inventories are currently limited and will support prices.
“Also, we may be in the early stages of an economic slowdown, which could dampen demand somewhat and help push prices down,” he said.
“But even with tight supply, any significant improvement in the economy could still cause prices to rise again. Expect Brent to remain a premium to WTI for quite some time – at least during the Russian invasion.”
Demand for oil could fall as the economy slows and the summer driving season eases, Bernard Weinstein, a retired economics professor at Southern Methodist University in Dallas, told TheStreet.
“The outlook for crude oil prices is difficult to predict, although the WTI-Brent spread could continue to widen until we find a resolution to the Russia-Ukraine conflict,” he said.
“In the US, a slowdown in the economy combined with lower demand after the summer holiday driving season should keep crude prices under control. The current economic downturn in China, the world’s largest crude oil importer to date, will also dampen crude oil demand.”
Global oil supplies will be impacted in the coming months by Russia’s ongoing sanctions, Rob Thummel, senior portfolio manager at Tortoise in Overland Park, Kan., told TheStreet.
“If we’re in a recession, oil prices are likely to fall to $80 by the end of the year,” he said. “If not, oil prices are likely to rise to around $110 by Q4 as Russian oil sanctions really start to reduce global oil supply.”