Americans who fill up their cars this Memorial Day weekend will get a break — at least compared to a year ago when gas prices were rising.
The national average price of regular gasoline is one dollar per gallon lower than a year ago. Drivers paid over $4.60 in May 2022 and prices reached $5 in the second week of June. This week, they paid just over $3.50 a gallon for regular gas, according to the AAA, the auto club.
Many energy experts said they expected prices to remain around these levels for much of the summer, barring a major disruption to global oil supplies.
As gasoline prices are posted on street corners on large colorful signs, they can have a strong psychological impact on consumers, especially on lower- and middle-income people who tend to drive older, less fuel-efficient vehicles and spend a higher proportion of their energy expenditures than wealthy people.
“Who wouldn’t be happy to save the money?” said Eddie White, 46, who uses his truck to deliver and offer Uber rides. By filling up at least once a day, White, who lives in the Houston area, said she was saving about $420 a week. He’s using that money to pay for classes that will help him become an insurance adjuster.
Aaron Hawkins, 22, runs a phone shop and serves in the Army Reserve. His booking duties require him to drive regularly between Houston and Baton Rouge, La. He said he was saving between $150 and $200 a month on gas.
“It’s much better for everyone,” he said of the lower prices.
Prices soared last year after Russia invaded Ukraine in February. Oil traders had expected Russian exports to drop because of sanctions imposed on the country by the United States and its allies in response to the invasion.
The war rages on, but Russia has found a way to keep selling its oil, albeit at heavily discounted prices, mostly to China and India. As a result, global oil supplies remain plentiful. It also helped that the United States and other industrialized countries released oil from their strategic reserves when prices were rising.
At the same time, demand has not soared for oil and the fuels made from it. In the United States, motor fuel use has not changed much from last year and has not yet recovered to pre-pandemic levels. But that may be starting to change. Gasoline demand has increased over the last month, and AAA predicts a 7% increase in holiday weekend trips over the past year.
As supply was stronger and demand weaker than many traders and analysts had expected, the benchmark U.S. crude price gradually dropped from around $120 a barrel last summer to around $72 a barrel on Thursday. -fair.
Prices briefly spiked last month after Saudi Arabia, Russia and other major oil producers announced they would cut output by 1.1 million barrels a day, or just over 1% of global supply.
But that rally broke down and oil prices have fallen in recent weeks. Many traders are increasingly concerned that the Federal Reserve’s interest rate hikes, designed to reduce inflation, will slow the economy and could cause a recession. Europe’s central banks are also adopting similar policies.
Fears of a recession have also increased in recent weeks because of the breakdown of debt ceiling talks between President Biden and House Republicans. Elsewhere, signs that China and India, the world’s most populous countries, are not buying as much fuel as expected also hurt oil prices, according to a report by the Eurasia Group, a research and advisory firm. .
“Last year you had more growth in demand and less growth in supply,” said Linda Giesecke, head of demand analysis at ESAI Energy, a consulting firm. “This year, demand and supply are relatively balanced.”
After nearly two years of battling high inflation, many Americans appear to have changed how and where they buy gasoline and diesel, said Tom Kloza, global head of energy analysis at Oil Price Information Service. Many people have started to buy fuel from large retailers, which often offer lower prices than independent gas stations.
“The Costcos, the BJs, the Sam’s Clubs, the Buc-ees, the supermarkets all captured market share from 2020 to 2022 and they’re not giving up,” Kloza said. “It’s harder for the little ones out there,” he added, referring to gas stations that use the brands of big oil companies like Exxon and Chevron, but which are typically owned by families or small businesses.
Warehouses and other large retailers can offer lower prices because they negotiate the best deals with refineries and buy gasoline in bulk.
Another factor driving down prices is the growing popularity of electric vehicles. Battery-powered vehicles could become increasingly important in reducing demand for fossil fuels and limiting climate change over the next decade.
Patrick De Haan, head of oil analysis at GasBuddy, a company that tracks gas prices, said he expects the national average price of regular gas to stay below $4 a gallon this summer. He estimated that consumers would spend $1.6 billion less than last year on gasoline over Memorial Day weekend. The Department of Energy recently estimated that the national average price of gasoline this summer would be $3.40 a gallon, about 20% lower than last year.
Of course, prices vary widely across the country, in part because of differences in state gas taxes and the cost of real estate, labor, and other expenses. The Department of Energy has estimated that the average price of gasoline on the West Coast will be $4.30 a gallon this summer, about 90 cents above the national average.
Gas prices tend to be highest between April and September, when people drive the most. Also, summer gasoline tends to be more expensive to produce because pollution regulations require it to be blended differently.