US drivers are in for a pleasant surprise as gas prices are currently dropping across the country. This is unusual as fuel prices usually increase during this time of the year.
According to AAA, the current average price for regular unleaded gasoline in the United States is $3.44 per gallon as of Monday. This represents a decrease of approximately 9 cents compared to the previous week. Moreover, it is worth noting that the current price is 19 cents less than it was a month ago and 14 cents lower than last year.
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According to energy experts, gas prices are currently on a downward trend due to a decrease in demand for fuel and a decline in oil prices. This is an uncommon occurrence during the summer months, when fuel demand typically increases as more individuals embark on road trips for their vacations.
In a note on Monday, Patrick De Haan, head of petroleum analysis at GasBuddy, reported that gasoline prices have dropped in almost every state over the past week. He also added that prices have fallen compared to a month ago. According to De Haan, the decline in prices means that Americans will be spending approximately $425 million less on gasoline per week than they did last year.
Americans cut back on travel
According to the U.S. Energy Information Administration, gasoline demand has decreased to approximately 8.94 billion barrels per day in the previous week. This is down from the 10 billion barrels per day that was required at the same time last year. One expert suggests that the decline in fuel demand could be attributed to the fact that Americans are not traveling as frequently as they had in the past.
According to Andrew Gross, spokesperson for AAA, the demand for travel is currently shallow. He stated that prior to the pandemic, the demand would typically increase during the summertime after Memorial Day. However, this is not the case anymore.
It’s no secret that Americans are feeling the pinch of sticky inflation, leading many to reconsider their spending habits. In addition, the demand for gas has decreased as more drivers are opting for electric or hybrid vehicles, according to experts.
It’s worth noting that gas prices are decreasing despite the fact that oil companies are transitioning to their summer blend of fuel. This blend is specifically formulated to not evaporate as quickly in warmer weather. Refineries must produce more than 14 variations of the summer blend due to various state regulations, which makes the production process even lengthier and can drive prices up.
Additional factors fueling price decline
In addition to other factors, the Biden administration recently revealed that it plans to release 1 million barrels of gasoline, equivalent to around 42 million gallons, from a reserve in the Northeast. This move is intended to reduce prices at gas stations.
According to experts, the decrease in oil expenses is another factor contributing to lowered gasoline prices. As crude oil is the primary element in gasoline, fluctuations in the cost of crude oil directly impact gasoline prices. The U.S. benchmark for crude oil, West Texas Intermediate crude, has remained stable at around $70 per barrel in recent weeks. On Monday, it closed at just under $78 per barrel, which, according to Gross, is a favorable position.
According to De Haan, the decrease in prices is expected to continue, and there may be further reductions in gasoline and diesel prices before July 4th.
Predicting oil prices can be a challenging task as they are highly susceptible to various global factors. One such factor is the production cuts imposed by OPEC and allied oil-producing nations that have previously led to a surge in energy prices. The volatile nature of oil prices makes it difficult to anticipate their fluctuations accurately.
