Bree Olutu pumps gas at an Exxon Mobil gas station on June 09, 2022 in Houston, Texas. Gas prices are hitting record highs as demand increases and supply fails to keep up.
Brandon Bell | Getty Images
Prices in the market have retreated from unprecedented levels in June, but remain stubbornly high.
Some relief can be seen. US Gasoline Futures have fallen more than 11% this week following a drop in oil prices as fears of a recession stoked worries about falling demand.
The national average price for a gallon of gas stood at $4.75 on Thursday, according to AAA. That’s down from the record $5,016 reached on June 14. But prices are still $1.62 higher than this time last year.
California has the highest state average at $6,185. The state’s Mono County is currently averaging $7,224 per gallon. South Carolina’s average of $4,257 is the lowest in the US
Patrick De Haan, head of oil analysis at GasBuddy, said the national average could fall to between $4 and $4.25 by mid-August, barring a spike in oil prices.
West Texas Intermediate Crude Oilthe US oil benchmark, fell below $100 per barrel on a Tuesday for the first time since mid-May. Oil accounts for more than half the price of gasoline, with refining costs and taxes, among other things, also affecting prices.
On Thursday, WTI traded around $99.51 a barrel, while gasoline futures rose 1.2 percent to $3.27 a gallon.
Gas station prices tend to rise faster than they fall as stations strive to lock in profits in a highly competitive business.
“When [oil] prices are trending up, stations typically lag 2-5 days behind price increases until the upward trend stops,” noted De Haan. “That means they can be weeks behind price increases. When prices finally fall, they lower them slowly to regain their margins from when prices rose. The longer and steeper uptrend, the slower stations are likely to push prices down when relief finally comes,” he added.
But there were some positive signs of relief. De Haan counted 2,535 gas stations with prices under $3.99 on Thursday. Although this is a small part of 145,000 gas stations in the countryDe Haan expects the number to double or triple in the next week.
Record prices have largely contributed to rampant inflation and headaches for the Biden administration ahead of November’s midterm elections.
Going forward, some Wall Street firms believe oil prices will return to their previous highs, which would mean only temporary relief at the pump. Goldman Sachs calls Brent crude oil, the international oil benchmark, to reach $140 this summer. It was trading at $101.81 on Thursday. Meanwhile, Citi has been an oil bear for some time and on Tuesday said Brent could take a hit $65 until the end of the year if the economy goes into recession.
Other factors that could push gas prices up again include a hurricane or any refining problems, with refineries already operating near peak capacity.
Andy Lipow, president of Lipow Oil Associates, predicted the national average would drop to $4.50. Without major shocks, prices may fall further.
“If we can get through the next six weeks without a major hurricane, we’re looking at $4.40,” he said.