Gas Prices Are Dropping, Possibly Because People Are Driving Less
80th Day of Falling Prices
Labor Day Weekend brought the busy summer season to a close. For those who traveled, the last few months were probably a stressful time since it began with some of the highest gasoline prices on record. But since that point, gas prices have been steadily declining.
On June 14th, gasoline prices peaked at just under $5.02 per gallon of unleaded gas. Last Monday, the average price per gallon was down to $3.79, according to AAA. Patrick De Haan, the head of petroleum analysis at GasBuddy, thinks that this trend could continue. He estimates that prices could drop as low as $3.29 per gallon.
Of course, this depends on whether or not there are any major market disruptions.
What Controls Gasoline Prices?
The market for gasoline is incredibly complex, and many different factors play a role in influencing prices. A few main factors that control what you pay at the pump include US gas production capacity, natural disasters, geopolitical conflicts, and market demand.
For example, the Russia-Ukraine conflict caused oil prices to spike as high as $130 per barrel. However, John Kilduff, a partner with Again Capital, notes that Russian oil is instead being redirected to India and China rather than being removed from the market altogether. For this reason, the impact of this conflict has not been as far-reaching as many were expecting.
Additionally, because the US has turned into a major supplier of oil, our production helps stabilize domestic prices. According to data from the US Energy Information Administration, the country exported nearly 10 million barrels of oil last week. During the same period last year, just 466,000 barrels were exported.
Driving Habits Have Shifted
Data collected by the Energy Information Administration shows gasoline demand has dropped off significantly over the summer. In other words, people are driving less because gas prices are so high. When the demand for a product drops, suppliers lower prices to match the demand. If consumers continue to limit their driving, gas prices could continue to fall.
80 days of falling gas prices is definitely a breath of fresh air for consumers. However, another shift in demand or a major weather event (such as a hurricane) could quickly reverse this trend.
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