Despite higher demand, a drop in the price of oil produces a welcome respite from $5 a gallon gasoline.
- National average gas price drops to $4.67 a gallon, a month after it topped $5.00 a gallon.
- Despite higher demand at the moment, a drop in the price of oil to below the $100 mark is credited with bringing down the price for US gasoline customers.
- Gasoline is currently least expensive in some of the southern states and in the Gulf Coast, but state averages are still above $4 a gallon.
Gas prices have backed off some of the highs we saw earlier this spring when the national average crested the $5 mark, with AAA noting at the start of this week that the national average has fallen to $4.67 a gallon. Prices have dropped over the past week despite a slight rise in demand attributed to the July 4 travel weekend, with the current drop credited to the falling price of oil.
“Usually, more people buying gas would lead to higher pump prices,” said Andrew Gross, AAA spokesperson. “But the price for oil, the main ingredient in gasoline, has fallen and is hovering around $100 a barrel. Less expensive oil usually means less expensive gas.”
AAA notes the price of gasoline is now 32 cents less than a month ago, which saw highs around the $5 mark two weeks after the Memorial Day travel weekend—usually the busiest summer travel stretch.
Among individual states, AAA notes Texas saw the biggest drop in the past week with the state average sinking 18 cents, with Ohio and Illinois close behind with 17-cent drops. The states of Wisconsin, Indiana, Kentucky, and Alabama also saw significant drops over the past week, with those state averages dropping 15 cents.
That’s the good news.
The bad news is that in most states gas prices are still averaging well above $4 a gallon, with most of the summer travel still ahead. This time last year, the national gas price average was a little over $3 a gallon, for reference, while in 2020 it was just above the $2 mark.
Meanwhile, the states with the least expensive gasoline at the moment are South Carolina, Georgia, and Mississippi where it currently averages $4.18 a gallon, with Louisiana and Texas not far behind with $4.22 averages. As usual, most of the states with the cheapest gas are along the Gulf Coast.
“According to new data from the Energy Information Administration (EIA), gas demand increased from 8.92 million b/d to 9.41 million b/d ahead of the 4th of July holiday, while total domestic gas stocks decreased by 2.5 million bbl,” AAA adds. “Typically, these supply/demand trends would put upward pressure on pump prices; however, falling oil prices have contributed to lower pump prices.”
While the drop in the price of oil since March—now under $100 a barrel (WTI crude is trading just below $98 today)—reportedly brought about the slight respite from $5 a gallon gasoline, the longer term outlook remains murky once again owing to unpredictable geopolitical developments.
This week President Joe Biden is visiting Saudi Arabia in what is believed to be an effort to once again convince the country to increase output, which could eventually result in lower gas prices. But at the moment relatively little faith is placed in the success of the effort or just how much gas prices stateside could fall, and whether it will happen this year at all.
A much more influential variable appears to be the European Union’s stance in regards to Russian oil and the current administration’s floated plans to somehow cap the price of Russian oil in foreign markets. This has never been tried before—with some analysts pointing to a resounding lack of success with sanctions against Russian natural gas, which have resulted in skyrocketing natural gas prices across the Atlantic and are now threatening to stall major industries all over western Europe.
In the meantime, we’ll take all the good news we can get when it comes to the price of gasoline we buy weekly.
Keyword: Gas Prices Keep Dropping, but Not to 2021 Levels