Inflation is cutting into consumers spending power and forcing them to cut back.
Mark Mulligan/Staff photographerWe can’t thank Joe Biden for falling gasoline prices just like we couldn’t blame him when prices shot up earlier this year.
Politicians can wield some influence over market trends, but oil and gasoline are commodities dictated by global supply and demand. Put simply: gasoline prices are falling because demand is falling, allowing inventories to recover.
Oil, gasoline’s key ingredient, fell below $90 a barrel Thursday for the first time since February, when Russia invaded Ukraine and sparked a global energy crunch. Traders are nervously unloading more supply as signs of a recession persist.
How far have gasoline prices fallen?
The average gas price in Houston fell to $3.73 cents a gallon this week after soaring above $4 a gallon for the first time in history in the months after Russia’s invasion of Ukraine. Prices here have fallen nearly 70 cents per gallon over the past month and 91 cents since prices here peaked at an average of $4.64 a gallon.
How do today’s gas prices compare to normal?
Houstonians are still paying roughly 97 cents per gallon more than they were last year, even as prices have steadily fallen. Nationally, gas prices are averaging around $4 a gallon, compared to $3 a gallon last year, when vaccines boosted summer travel, and $2.60 a gallon in July 2019.
The early pandemic brought the lowest gas prices in recent memory, knocking them down to $2 a gallon nationally in July 2020, as COVID raged and lockdowns ravaged demand.
Why is demand falling now?
Part of the decline is seasonal. People drive more in summer and the driving season peaks in early July and then tapers into the fall. The rest we can blame on inflation.
Inflation is cutting into consumers spending power and forcing them to cut back. It has has become such a driving force that it is doing more to push down demand for gasoline than the pandemic did in summer 2020, according to Energy Department data released Wednesday.
Demand for gasoline fell 8 percent to 8.5 million barrels per day over the last week — 13 percent below 9.8 million barrels per day during the same week last year, and nearly 1 percent below the same week in 2020.
Why aren’t diesel prices coming down more?
Diesel prices aren’t moderating as much as gasoline prices because diesel demand has not fallen as sharply and stockpiles are still incredibly low — inventories of distillates, which include diesel are still 25 percent below normal for this time of year.
Will prices keep falling?
Trends are looking good, but we’re not out of the woods, yet. Gasoline prices should progressively decrease if the U.S. economy weakens. If America avoids a recession and demand does not taper off, prices will likely stay elevated. Oil producers are still struggling to hire workers and access sold-out equipment, so they will need time to ramp up their capacity if demand stays high.
Tight refining capacity, too, also leaves us more vulnerable to catastrophe — a hurricane or fire that knocks out a refinery could lead to a spike in fuel prices.
amanda.drane@chron.com
