(The Hill) – The average gas price nationwide is nearing $4 a gallon, part of a nearly 60-day decline from unprecedented peaks earlier this year.
However, experts say Mother Nature could quickly push prices back up once hurricane season hits the Gulf Coast.
On Wednesday, the national average for a gallon of gasoline was $4,163, the latest in a 50-day decline, according to data from AAA. Numerous states, especially in the southeastern US, are already below $4, with the lowest average prices – $3,667 – being in Texas.
The drop follows a period earlier this year when average prices hit an all-time high of $5 in June, according to data compiled by GasBuddy. A number of atypical factors, from the Russian invasion of Ukraine to pent-up demand following the end of pandemic restrictions, contributed to the price rise. The factors pushing it back down can also be difficult to predict.
Patrick De Haan, GasBuddy’s head of petroleum analysis, noted that much of the recent decline is likely related to fears of an economic slowdown. “Market oil prices reflect the increasing risk that oil consumption will be lower in the event of a recession,” De Haan said.
However, he added: “Not only that, we have seen some increase in petrol stocks over the last six weeks. And that may also be contributing to part of the decline.”
Devin Gladden, manager of federal affairs at AAA National, said that barring some spikes around the holiday, the US gas market is “roughly at the same level” as it was before the pandemic slumped demand in early 2020.
Gladden described the downtrend as “an odd case where it’s quite similar to when we saw tight COVID precautions and these factors are causing prices to continue falling.”
Meanwhile, he added, fears of a recession “are affecting oil prices in particular because of the fear that if economic growth falters or we enter a recession… it could potentially hurt global crude oil demand.” .
“That’s why the market is concerned, because when demand falls, pricing usually follows, and that’s how they hedge against potentially lower prices,” he added.
President Biden, who has seen gas prices drag his permits down, took a lap of honor on Wednesday. tweet“More than half of all gas stations in the United States now offer gasoline for less than $4 a gallon.”
The government has frequently emphasized the role the invasion of Ukraine has played in the price hikes, branding it “Putin’s price hike” and scourging the oil industry for the number of idle leases it currently owns on federal land.
However, De Haan said a number of factors could lead to a recovery in prices.
“The underlying question is, will Mother Nature bring a Category 4 or Category 5 hurricane to the Gulf of Mexico?” said De Haan. Gulf hurricanes “constantly” shut down platforms and refineries for four to six weeks, he noted.
Gladden was more confident about the dangers of hurricane season, saying the industry is “hoping for the best during hurricane season, but we’re obviously prepared.”
However, he added: “Remember that even the threat of a hurricane can cause crude oil production to shut down, particularly in the Gulf Coast. And so only shutdowns or preventive measures can limit supply and cause prices to rise.”
Another factor that could cause prices to rise again, according to De Haan, is the relative lack of action by OPEC to increase supply.
Earlier on Wednesday, OPEC announced it would only slightly increase production by 100,000 barrels per day. The announcement came shortly after Biden met with Saudi Crown Prince Mohamed bin Salman and asked for the kingdom’s help in stabilizing global oil markets.
There is also the possibility that recession fears will not materialise.
“If we don’t see an economic slowdown and we see better economic news, we could see oil prices going right back up,” De Haan said. Meanwhile, he added, diesel deliveries could also take a hit in the fall and winter if demand picks up.
“If agricultural consumption picks up and people start filling up their heating oil tanks, then Diesel could see some pretty apocalyptic numbers later this year if things don’t go well,” he said.
However, over the same period, the downtrend on the gas side of the equation is likely to continue, De Haan said.
“Gasoline could see lower prices in the fall if we can avoid things like hurricanes or other unexpected outages at refineries and the like.”
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