Brie Olootu pumps gasoline at an Exxon Mobil gas station on June 09, 2022 in Houston, Texas. Gas prices break record highs as demand rises and supply fails to keep up.
Brandon Bell | Getty Images
Prices at the pump have retreated from never-before-seen levels in June but remain stubbornly high.
Some relief might be in sight. US gasoline futures are down more than 11% this week after oil prices fell as recession fears spark concerns about a slowdown in demand.
According to AAA, the national average for a gallon of gasoline was $4.75 as of Thursday. That’s down from the June 14 record high of $5,016. But prices are still $1.62 higher than this time last year.
California has the highest state average at $6,185. The state’s Mono County currently averages $7,224 per gallon. South Carolina’s average of $4,257 is the lowest in the US
Patrick De Haan, GasBuddy’s head of petroleum analysis, said the national average could fall to between $4 and $4.25 by mid-August if oil prices don’t rise.
West Texas Intermediate crude, the US oil benchmark, slipped below $100 a barrel on Tuesday for the first time since mid-May. Oil accounts for more than half the cost of gasoline, with refining costs and taxes affecting prices, among other things.
On Thursday, WTI traded around $99.51 a barrel, while gasoline futures were up 1.2% at $3.27 a gallon.
Prices at the pump tend to rise faster than they fall as gas stations try to make a profit in a highly competitive business.
“When [oil] Prices are trending up, gas stations typically lag behind price increases by 2-5 days before the uptrend stops,” noted De Haan. “That means they can be weeks behind with price increases. When prices eventually fall, they slowly lower prices to regain margins they made when prices went up. The longer and steeper the uptrend, the slower stations are likely to cut prices when relief finally comes,” he added.
But there have been some positive signs of easing. De Haan counted 2,535 gas stations with prices under $3.99 on Thursday. Though that’s just a small fraction of the country’s 145,000 service stations, De Haan expects the number could double or triple in the next week or so.
Record prices have been a major contributor to runaway inflation and a headache for the Biden administration ahead of November’s midterm elections.
President Joe Biden asked Congress in June to temporarily suspend the state gas tax, but such a move has received little support from lawmakers.
Looking ahead, some Wall Street firms believe oil prices will revisit previous highs, which would mean only a temporary easing at the pump. Goldman Sachs says Brent crude, the international oil benchmark, will hit $140 this summer. It traded at $101.81 on Thursday. Meanwhile, Citi has been an oil bear for some time, and on Tuesday Brent said Brent could hit $65 by the end of the year if the economy slides into recession.
Other factors that could push gas prices back up include a hurricane or problems related to refineries as refineries are already running near peak capacity.
Andy Lipow, president of Lipow Oil Associates, predicts the national average will fall to $4.50. In the absence of major disruptions, prices could fall even further.
“If we get through the next six weeks without a major hurricane, we’re looking at $4.40,” he said.