Signs point to mild gas prices in preelection summer

(The hill) – Gas prices in the US started the summer season lower than usual, with experts pointing to moderate demand and cheaper oil as factors contributing to moderate costs.

While confounding variables like hurricane season and the effects of extreme heat could still shake things up, prices are expected to continue to fall in the coming weeks — a welcome prediction for consumers and President Joe Biden, who is seeking re-election this fall. .

Prices started the week at a national average of $3.44, down nearly 10 cents from last week, according to AAA. On Wednesday, that average rose to $3.45, but remains about 15 cents below the same time last year. The decline is even more pronounced compared to the previous month, when the average hovered around US$3.61.

“[Prices] are falling, and they’re likely to continue falling until we get to the Fourth of July…that’s as far as we feel comfortable projecting,” said Andrew Gross, public relations manager at AAA. The gap could continue to widen, he said, possibly dropping below $3.30 on the national average.

“As far as prices go, it’s been a pretty noticeable decline for most people,” said Patrick DeHaan, head of petroleum analysis at GasBuddy.

At the state level, he added, some states like Arizona are down nearly $1 a gallon compared to this point in 2023. As of Wednesday, AAA data indicates that averages in Oklahoma, Tennessee, Arkansas and Mississippi have fallen below from $3 a gallon. Zooming in further, DeHaan said tens of thousands of individual gas stations are also under $3, most of them in the Gulf region and the South in general.

Looming over this minimal pain at the pump is the impending 2024 presidential election. While presidents have little or nothing to do directly with the price of gas, they typically receive credit or blame for it from voters. Biden, in particular, saw his approval ratings continue to fall in the summer of 2022, when already rising prices reached record levels after Russia’s invasion of Ukraine roiled global energy markets. The White House called the spikes “Putin’s price hike” but sought to take credit for the declines that have occurred since then.

“Core inflation is at its lowest level since April 2021, food prices have fallen for four consecutive months, and gasoline prices are below $3.50 on average across the country,” Biden said in a White House statement Tuesday following the release of the May consumer report. price index report.

The administration, after releasing a record 180 million barrels from the Strategic Petroleum Reserve to offset shocks from the Ukraine invasion, also recently announced another 1 million barrel release in the Northeast before Memorial Day.

Other factors have also played a role in recent changes in the price of oil, which Gross notes is a major contributor to gas prices.

The OPEC bloc of major oil-producing countries announced a production cut of 1.65 million barrels per day last April with the aim of boosting oil prices and has extended the cut several times, most recently agreeing at the beginning of June to extend it until the end of 2025. .

However, the cuts have, to some extent, become the status quo, DeHaan said, to the point that the market reaction to them is now minimal.

With the cuts a foregone conclusion, he said, “the market didn’t react when they extended those cuts again.” In fact, he said, oil prices have fallen as a result of OPEC setting an end date for production cuts, although the bloc may announce another extension at some point.

Additionally, domestic oil production has reached record levels under the Biden administration and “the market doesn’t react to OPEC statements like it used to,” Gross said.

Amid all this, the price of benchmark Brent crude fell to $82 per barrel in May, an $8 drop from April, according to data released by the Energy Information Administration on Monday.

Cheap oil has combined with relatively weak demand to create the current trend in gas prices, Gross said. DeHaan projected current gasoline demand to be equivalent to about 8.8 million barrels of oil per day.

“When the number starts with eight instead of nine in the summer, things get a little mellow,” he said.

Gross points out possible reasons for weaker demand: Demand suffered a big drop during 2020 in the heart of the COVID pandemic, and those effects still linger, combined with cars becoming more fuel efficient and more people to buy electric vehicles.

“After a major catastrophe like 9/11 or the pandemic, it takes four to five years for people to get back on their feet,” he said. “Maybe we are in the same period, but maybe this summer will prove that demand is back. Maybe we’re back to normal, [but] We probably won’t know until September.”

Following record gas prices in the summer of 2022, he added, AAA research indicates that many Americans have begun driving less and consolidating their errands into a single car trip to save money. “Maybe these habits lasted, we don’t know yet,” he said.

However, the next few seasons could be a shock to the system. First, hurricane season could disrupt production in the Gulf of Mexico, or even the appearance of such a storm could cause market jitters that could trigger price increases. The other factor is extreme summer heat: Last year was the hottest summer on record, and 2024 will likely bring similar extremes. These temperatures can disrupt refinery operations, Gross noted.

“Refineries are like Goldilocks, they don’t like extreme heat or extreme cold, [and] sometimes they have to reduce production” as a result, he said.