Gas is averaging $3.99/gallon, but how low can it go?
One issue Americans across the country can agree on: The gas prices this summer have been just too high. But if you’ve filled up recently, you might have noticed the price at the pump starting to fall. (Thank goodness.) Is this just a temporary fluke, or are we on a downward trend that’s here to stay? Here’s what we know.
What caused the hike?
We probably don’t need to tell you that gas prices have been on the incline since October. Our wallets started hurting when the price of crude oil increased due to many factors, including U.S. and European sanctions on Russia, whose crude oil made up about 12 percent of the global market. At the same time, the demand for oil rebounded from pandemic levels (turns out staying home can be good for our bank accounts in more ways than one), while the cost of refining crude oil also increased due to refinery closures. The result was a sort of perfect storm that caused the painful $5-per-gallon prices Americans were seeing at gas stations across the country this past June.
What did Biden do to help?
While some Republicans blamed the President’s climate policies, his choice to cancel the sales of a few oil and gas drilling leases, and his decision to abandon the Keystone XL pipeline for the rise in prices, experts say the markets don’t work that way. They point to complications caused by coronavirus and the global supply and demand — not one president’s actions — for the hike. On the same side of that coin, the President’s efforts to bring down gas prices can’t take full credit for the recent drop, either. President Biden tapped the Strategic Petroleum Reserve, permitted the sales of slightly cheaper (yet higher-emission-producing) higher-ethanol gasoline, and implored Congress to suspend the federal gas tax (which it has not done) — all in the hopes of providing some relief at the pump. While Americans can fill up a bit easier now, analysts say we have market forces to thank more so than any executive actions.
Why are prices now going down?
If you couldn’t already guess, a number of complex factors often go into determining gas prices. At the risk of sounding like an economics lecture, we’ll just say that the price of crude oil has gone down significantly from where it was just a few months ago (we’re talking $93.31 per barrel versus over $130 back in March). There’s also the possibility that everyday people feeling the hit to their wallets decided to drive less, which decreased demand, which in turn drove down prices — so if you want to take credit for helping the economy by staying at home, we won’t stop you.
Are the prices here to stay?
The good news is that for the first time since March, gas prices have dropped below $4 a gallon. The national average per gallon is currently sitting at $3.99 (which might only be a penny off from $4, but we’ll take it). That’s not altogether surprising, considering that a month ago, Patrick De Haan, the head of petroleum analysis at GasBuddy, was predicting that the price of gas would fall as much as 40 to 65 cents per gallon in the coming weeks. At that time, the national average was $4.75 per gallon, so it looks like we’re right on track with De Haan’s projection. He also predicts gas will drop as low as $3.89 per gallon by next week.
The less-than-good news is that, like any flash sale, these savings might not last much longer. The price of crude oil per barrel is already up 5% from last week, which experts warn could signal the bounce-back nobody’s asking for. And, not to get too scary, but with the Strategic Petroleum Reserve ending this fall (and needing to be refilled), plus China’s economic rebound after another wave of coronavirus lockdowns, we could be setting the stage for another increase in demand. So, enjoy the lower gas prices while you can, and make sure you’re employing some of our tips for how to save at the pump.
