Gasoline prices, a source of pain last year, have plummeted

Americans who fill up their cars on Memorial Day weekend will get a break—at least compared to last year, when gasoline prices were rising.

The national average price for regular gasoline is a full dollar per gallon less than it was a year ago. Drivers paid more than $4.60 in May 2022, and prices reached $5 by the second week of June. This week, they paid just over $3.50 a gallon for regular gasoline, according to the AAA auto club.

Several energy experts said they expect prices to stay around these levels for most of the summer, barring a major disruption to global oil supplies.

Because petrol prices are posted on street corners on large colorful banners, it can have a strong psychological impact on consumers, especially on middle- and lower-income people who tend to drive older, less fuel-efficient cars and spend a higher proportion of their cars. Income on energy from the wealthy.

Who wouldn’t be happy to save money? said Eddie White, 46, who uses his pickup truck to make deliveries and offer rides via Uber. Mr. White, who lives in the Houston area, said he’s been saving about $420 a week, which he forks at least once a day. He’s using that money to pay for classes that will help him become an insurance adjuster.

Aaron Hawkins, 22, runs a phone store and works in the Army Reserve. His backup duties required him to drive regularly between Houston and Baton Rouge, Los Angeles. 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 rose last year after Russia invaded Ukraine in February. Oil traders had been expecting a decline in Russian exports due to the sanctions imposed by the United States and its allies on the country in response to the invasion.

The war is still going on, but Russia has found a way to continue selling its oil, albeit at deeply discounted prices, mainly to China and India. As a result, global oil supplies remain ample. It also helped the United States and other industrialized nations free up oil from their strategic reserves when prices were rising.

At the same time, the demand for oil and fuel produced from it did not rise. In the United States, motor fuel use hasn’t changed much from last year and has yet to recover to pre-pandemic levels. But that may be starting to change. Gasoline demand has been up over the past month, and AAA expects a 7 percent increase in weekend travel compared to a year ago.

As supply was stronger and demand weaker than many traders and analysts expected, the price of US benchmark oil gradually fell from around $120 a barrel last summer to around $72 a barrel on Thursday.

Prices rose briefly last month after Saudi Arabia, Russia and other major oil producers announced they would cut production by 1.1 million barrels per day, or just over 1% of global supply.

But that rally has faded, and oil prices have plummeted in recent weeks. Many traders are increasingly worried that the Federal Reserve’s interest rate hike, designed to lower inflation, will slow the economy and could cause a recession. Central banks in Europe also follow similar policies.

Fears of a recession have also grown in recent weeks due to stalled debt ceiling negotiations between President Biden and House Republicans. Elsewhere, signs that China and India, the world’s most populous countries, are not buying as much fuel as expected has also weighed on oil prices, according to a report by the Eurasia Group, a research and advisory firm.

“Last year, you had higher demand growth and lower supply growth,” said Linda Giesecke, head of demand analysis at ESAI Energy, a consulting firm. “This year, demand and supply are relatively balanced.”

After nearly two years of grappling with soaring inflation, it appears that many Americans have changed how and where they buy gasoline and diesel, said Tom Kloza, global head of energy analysis at Oil Price Information Service. Many people are starting to buy fuel at large retail stores, which often offer lower prices than independent gas stations.

“Costcos, BJs, Sam’s Clubs, Buc-ees, supermarkets all had market share from 2020 to 2022, and they’re not giving it up,” said Mr. Cloza. “It’s harder for the little guy,” he added, referring to gas stations that use major oil company brands like Exxon and Chevron, but are typically owned by families or small businesses.

Depots and other large retailers can offer lower prices because they negotiate the best deals with refiners and buy gasoline in bulk.

Another factor dampening prices is the growing popularity of electric cars. Battery-powered vehicles could become increasingly important in reducing the demand for fossil fuels and curbing climate change over the next decade.

Patrick DeHaan, head of petroleum analysis at GasBuddy, a company that tracks gas prices, said he expects the national average price for common gas to stay below $4 a gallon this summer. He estimated that consumers will spend $1.6 billion less than a year ago on gasoline over Memorial Day weekend. The Department of Energy recently estimated that the national average price for gasoline this summer will be $3.40 a gallon, about 20 percent lower than last year.

Of course, prices vary widely across the country, due in part to differences in state gas taxes and the cost of real estate, labor, and other expenses. The Department of Energy has estimated that the average West Coast gasoline price will be $4.30 a gallon this summer, about 90 cents above the national average.

Gasoline prices are usually highest between April and September, when people drive more. In addition, summer gasoline tends to be more expensive to produce because pollution regulations require it to be blended differently.

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