Before Russia’s invasion of Ukraine sparked a worldwide energy crisis, gas was inexpensive in February. AAA claimed Wednesday’s average national gallon price was $3.50.
This is great news, and GasBuddy predicted it might drop below $3 by Christmas.
All that relief likely boosted Thanksgiving weekend gas buying.
The national average price of a gallon of gas is now under $3.50 for the first time since February. This continued decline in prices is adding up to real savings for American families.
— The White House (@WhiteHouse) November 30, 2022
Emma Rasiel, a Duke University economics professor, said consumers might spend $50 to fill their tank rather than $80. It’s consumers’ key inflation indication. It’s the only thing they’ll track since they top up their vehicle every week.
Cheaper gas might mislead customers, Rasiel said. Other commodities and services are less unpredictable, and there’s little sign that cheaper petroleum would lower their prices.
Even as lower gas prices stimulate a holiday buying binge, they reflect the global financial hardship on individuals and businesses.
Demand for oil and gas is declining as nations ready for recession, coronavirus epidemics in China forewarn severe financial troubles, and drivers cut back on petrol-guzzling to offset ballooning mortgage and stock market declines.
For now, fears that Russian oil restrictions would cause a supply crisis and send prices rising have given way to struggling economies and nervous capital industry.
Ben Cahill, a power security specialist at the Institute for Strategic and International Studies, predicts a catastrophic recession in Europe and an additional economic slump in the U.S. as people are struggling with high rates of interest and concern about their wealth and savings. All of this hurts oil demand. So do prices.
A few U.S. oil refineries have resumed producing gasoline after months of maintenance and repairs.
As important is China’s unrest. As politicians indicate more coronavirus lockdowns, sparking demonstrations across the country, oil markets are negative.
Capital Economics estimates China’s oil purchases to decline by 1 million barrels daily in December due to coronavirus illnesses. Such a decline in international oil markets reduces Brent crude by $10 a barrel, or 10%.
The hefty cost of gasoline was a big component in the heavy inflation that slammed the U.S. and other nations, but the drop in fuel prices is doing nothing to help the economy.
Analysts believe fuel-dependent manufacturers need months of low prices before adjusting product prices. Some drivers gain more than others. Californians spend roughly $5 a gallon for ordinary.
National average continues to drop, $3.517/gal, still tracking close to the fast case model, on our way to lower #gasprices. Most common price $3.39/gal, but is just days away from falling to $2.99/gal! Median is $3.43/gal. pic.twitter.com/803d9doeXQ
— Patrick De Haan ⛽️📊 (@GasBuddyGuy) November 28, 2022
How Much Could Prices Change?
Other variables cloud the pricing forecast. The U.S. and Europe are discussing a Monday oil price ceiling. Russian oil will continue to flow into global markets, but at prices restricting Kremlin war machine profits.
Such a price ceiling has never been enforced on a major oil-producing country and might cause instability. If the ceiling is set too low, as some European nations want, Moscow might shut off its supply, driving up world costs.
The OPEC Plus oil-producing alliance meets next week to decide how much oil to send in the coming months. The group may curtail production to boost pricing.
AAA spokesperson Andrew Gross claimed OPEC might ruin the picnic. Predicting their actions is difficult.
More Factors Affecting Output
These things worry John Catsimatidis, who has scores of gas pumps and a plant — but not because they may hurt his company. When the business owner talks about gas costs, he’s more concerned about what they may entail for his real estate firm.
Rising financing rates have hampered this venture. A six-month period of $3 gas, he argued, may lower inflation and imply that the Fed can pause rate rises.
Washington officials can’t do much to lower gas costs. Global markets control them.
The Biden presidency is undoubtedly urging Saudi Arabia not to limit supply. The last time OPEC Plus met, in October, the group ignored Washington’s call to expand output, decreasing it by 2 million barrels per day.
Last Monday, the President relaxed Venezuelan sanctions to restart oil production. Before Venezuelan oil is supplied, only small amounts will be accessible.
Most drivers ignore global oil market dynamics. Yet they are cautious, despite spending on holiday gifts.
AAA data reveals they’re keeping with the conservation-minded driving behaviors they adopted when petrol hit $5 a gallon, combining errands into single vehicle trips, driving slower, and just half filling their tanks. Despite falling gas prices, drivers aren’t letting up.
Consumers’ perspective improves when petrol costs fall, proving this point. The University of Michigan Consumer Sentiment Index reveals other financial difficulties overshadow cheaper gas. Despite falling gas costs, consumer concern rose in November, a nationwide study found.This article appeared in NewsHouse and has been published here with permission.