It’s not at all clear whether President Joe Biden’s latest announcement that he will release oil from the country’s emergency stockpile will help lower gasoline prices. But the good news for drivers — and Biden — is that several factors point to lower prices coming at the pumps.
The national average was $3.85 a gallon on Wednesday, down 2 cents from Tuesday and 7 cents from last week. Much of this drop was due to a sharp drop in prices in the western states, where prices had reached near-record highs earlier in the month.
A major driver of the recent price spike has been the shutdown of U.S. refineries for routine maintenance or following accidents, such as an explosion at a refinery near Toledo, Ohio, last month. But a number of West Coast refineries that were offline have resumed operations, causing gasoline prices west of the Rockies to plummet, pushing down the national average.
In the past week alone, the average price in California fell 30 cents per gallon, and there was a 25 cent drop in Oregon and a 20 cent drop in Washington and Nevada.
While refineries tasked with accident repairs won’t be back online anytime soon, those that had been shut down for scheduled maintenance are now set to resume operations, experts say. This will likely lead to lower prices elsewhere in the country, although the decline is not as steep as it has been in the West.
“What’s happening in the west is a bit of a preview and may happen in other parts of the country,” said Tom Kloza, global head of energy analytics at OPIS, which tracks prices at 130,000 stations. -American service for AAA.
Oil and gas futures fell on Tuesday after news broke that Biden would announce the release of 15 million barrels of oil from the country’s strategic petroleum reserve. But that was just another phase of the planned six-month, 180 million barrel release announced in late March.
Oil analyst Andy Lipow said markets initially moved on confusion over whether or not more oil was coming out of the strategic reserve.
“The market has been quite volatile,” Lipow said. “As it began to sell [Tuesday]this triggered a liquidation [of oil futures].” Oil and gas prices both rebounded slightly in Wednesday’s trading.
Drivers have benefited from a long and steady decline in gasoline prices that has seen the national average fall for 98 straight days, from a record low of $5.02 a gallon in June to a low of $3.68 per gallon a month ago. But with the price up nearly 18 cents a gallon — 5% — in the month that followed, and with the midterm elections just weeks away, Biden was feeling the pressure to act.
“Politicians take credit when gas prices go down and get blamed when they go up,” Lipow said, “even though they have little to do with the actual price movement.” .
Whether or not Biden’s decision to release oil from the SPR had a significant impact, several other factors are driving down future prices. One is the seasonal drop in demand at the end of the summer driving season, coupled with the regularly scheduled end of regulations requiring cleaner – and more expensive – gasoline blends to be sold during the summer to combat against smog.
But an even bigger factor is the growing fear that the United States and other global economies will soon slide into recession. Recessions are a surefire way to reduce demand for gas and oil, as fewer people have jobs to commute to and less money to spend on travel.
“When the world goes into a recession and the demand for commodities goes down, the market is ruthless,” Lipow said.