For the first time in months, the average retail price of gasoline in the United States fell below $4 a gallon on Thursday, providing some respite to drivers in the world’s largest consumer of the fuel.
According to the American Automobile Association, the national average price for regular unleaded gas declined to $3.990 per gallon on August 11.
In June, gasoline prices reached an all-time high of $5.02. That high cost has reduced expenditure, and prices have fallen as market fears of severe supply constraints have faded since Russia’s initial invasion of Ukraine in February.
Summer is when gasoline costs tend to peak. They generally drop after the summer driving season finishes around Labor Day, but that does not happen until September 5.
As the November elections approach, the new price cut may benefit President Joe Biden’s administration and Democrats in Congress. Following Moscow’s invasion of Ukraine, the White House has taken various initiatives to reduce oil costs.
Crude oil, the primary driver of gasoline costs, once hit $139 a barrel; it was $92 on Wednesday.
“More work remains, but prices are coming down, and the President will continue to call on domestic and international oil producers to increase output so that they can continue to come down,” said White House spokesperson Karine Jean-Pierre earlier this week.
The White House is releasing more than 180 million barrels of crude oil from the United States Strategic Petroleum Reserve. This year, US oil output increased by nearly 500,000 barrels per day to 12.2 million bpd.
Gasoline futures are down 27.3% from their June highs, while crude oil is down 25%. The retail reduction is more than 20%, but certain states, such as Ohio, have received more respite, with prices down 27% from their peak.
According to a July U.S. Treasury Department estimate, the SPR release, coordinated with releases from members of the International Energy Agency, reduced the price of gasoline by 17 cents to 42 cents per gallon, however the true impact was difficult to verify.
Bank of America showed that, the drop in prices has aided low-income Americans. Gasoline spending as a percentage of total card spending per household declined to 9.3% in July for lower-income households, down from nearly 10% in June, according to the bank.
Inflation expectations are also declining, with consumer forecasts for inflation in a year and three years in the United States falling substantially last month.
Inflation remained flat in July, driven lower by a dramatic drop in energy costs, but consumer inflation is 8.5% higher than a year ago, hurting American purchasing habits.
With employment growth being solid, demand may rebound in the coming months, with prices remaining low. On earnings conferences last week, refining executives were upbeat about consumption for the remainder of 2022.
Refiners are expected to emphasize heating oil processing in the coming months, reducing gasoline output and potentially squeezing the gasoline market. Gasoline stockpiles in the United States are at 220 million barrels, the lowest level in the last five years.