Americans filling up their cars this Memorial Day weekend will be taking a break — at least compared to a year ago, when gas prices skyrocketed.
The national average price for regular gasoline is a full dollar per gallon lower than a year ago. Drivers paid more than $4.60 in May 2022, and prices had reached $5 by the second week of June. This week, they paid just over $3.50 a gallon for regular gasoline, according to the motorcycle club AAA.
Many energy experts said they expected prices to remain around this level for most of the summer, barring a major disruption to global oil supplies.
Because gasoline prices appear on large, colorful signs on street corners, they can have a powerful psychological impact on consumers, especially those on middle and lower incomes who tend to drive older, less fuel-efficient vehicles and spend more of their money give out. income from energy than wealthy people.
“Who wouldn’t be happy to save the money?” said Eddie White, 46, who uses his pickup to make deliveries and offer rides through Uber. Mr. White, who lives in the Houston area, fueled up at least once a day and said he saved about $420 a week. He uses that money to pay for lessons that will help him become an insurance expert.
Aaron Hawkins, 22, manages a phone shop and serves in the Army Reserve. His reserve duties require him to drive frequently between Houston and Baton Rouge, La. He said he saved between $150 and $200 a month on gas.
“It’s a lot better for everyone,” he said of the lower prices.
Prices rose last year after Russia invaded Ukraine in February. Oil traders had expected Russian exports to decline because of sanctions imposed on the country by the United States and its allies in response to the invasion.
The war is still raging, but Russia has found a way to keep selling its oil, albeit at heavily discounted prices, mainly to China and India. As a result, the global oil supply remains abundant. It also helped that the United States and other industrialized countries released oil from their strategic reserves as prices rose.
At the same time, the demand for oil and the fuels produced from it has not increased enormously. In the United States, motor fuel use has not changed much from last year and has yet to recover to prepandemic levels. But that may be starting to change. Gasoline demand has surged over the past month, and the AAA predicts a 7 percent increase in holiday weekend travel over last year.
With supply stronger and demand weaker than many traders and analysts had expected, the US benchmark oil price gradually fell from about $120 a barrel last summer to about $72 a barrel on Thursday.
Prices rose last month shortly after Saudi Arabia, Russia and other major oil producers announced they would cut production by 1.1 million barrels per day, or just over 1 percent of global supplies.
But that rally fizzled out and oil prices fell in recent weeks. Many traders are increasingly concerned that the Federal Reserve’s interest rate hikes, designed to lower inflation, will slow the economy and could trigger a recession. Central banks in Europe are also pursuing a similar policy.
Recession fears have also increased in recent weeks amid the faltering debt ceiling negotiations between President Biden and House Republicans. Elsewhere, signs that China and India, the world’s most populous countries, are not buying as much fuel as expected have also put a damper on oil prices, according to a report by the Eurasia Group, a research and consulting firm.
“Last year you had higher demand growth and lower supply growth,” said Linda Giesecke, chief of demand analysis at ESAI Energy, a consulting firm. “This year, supply and demand are reasonably balanced.”
After struggling with high inflation for nearly two years, many Americans seem to have changed how and where they buy gasoline and diesel, said Tom Kloza, the global head of energy analysis at Oil Price Information Service. Many people have started buying fuel from chain stores, which often offer lower prices than independent gas stations.
“The Costcos, the BJs, the Sam’s Clubs, the Buc-ees, the supermarkets, they’ve all gained market share from 2020 to 2022, and they’re not giving up,” Mr Kloza said. “It’s harder for the little guy out there,” he added, referring to gas stations that use the brands of major oil companies like Exxon and Chevron, but are usually owned by families or small businesses.
Warehouse stores and other large retailers can offer lower prices because they negotiate the best deals with refiners and buy their gasoline in bulk.
Another factor dampening prices is the growing popularity of electric vehicles. Battery-powered vehicles could become increasingly important in the next decade to reduce fossil fuel demand and mitigate climate change.
Patrick De Haan, chief of petroleum analysis for GasBuddy, a company that tracks gas prices, said he expected the national average price for regular gas to remain below $4 a gallon this summer. He estimated that consumers would spend $1.6 billion less on gasoline on Memorial Day weekend than last year. The Department of Energy recently estimated that the average national price for gasoline this summer would be $3.40 per gallon, about 20 percent lower than last year.
Of course, prices vary widely across the country, in part because of differences in gas taxes and the cost of real estate, labor, and other expenses. The Energy Department estimated that the average price of gasoline on the West Coast this summer would be $4.30 a gallon, about 90 cents above the national average.
Gasoline prices are usually highest between April and September, when people drive more. In addition, summer grade gasoline is usually more expensive to produce because pollution regulations require it to be mixed differently.