The average price of gas is approaching $4 a gallon nationwide, part of a nearly 60-day decline from unprecedented spikes earlier this year.
However, experts say Mother Nature could send prices back up in a hurry as the Gulf Coast’s hurricane season picks up.
As of Wednesday, the national average for a gallon of gas was $4.163, the latest in a 50-day decline, according to data from AAA. Numerous states, predominantly in the Southeastern U.S., are already below $4, with the lowest average prices — $3.667 — in Texas.
The decline follows a period earlier this year when average prices reached 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 as pandemic restrictions ended, contributed to the price spike. The factors pushing it back down can be hard to predict as well.
Patrick De Haan, head of petroleum analysis for GasBuddy, noted that much of the recent decline is likely tied to fears of an economic downturn. “The market oil prices are reflecting the rising risk that if we do see a recession, it’s going to be lower oil consumption,” De Haan said.
However, he added, “not only that, we have seen some increase in gasoline inventories over the last really six weeks or so. And that’s also maybe contributing to some of the decline.”
Devin Gladden, AAA National’s manager for federal affairs, said that apart from some spikes around the holidays, the U.S. gas market is “roughly in line” with where it was before the pandemic caused demand to collapse in early 2020.
Gladden described the downward trend as “a weird case where it’s pretty much trending like it was when we saw severe COVID precautions, and those factors are leading prices to continue to decline.”
Meanwhile, he added, anxiety about a recession is “having an impact on oil prices, in particular, because there’s a concern that if economic growth stalls or we enter a recession … that could potentially impact global crude demand.”
“That’s why the market is concerned, because when demand declines, pricing typically follows, and so they’re hedging against potentially lower prices,” he added.
President Biden, who has seen gas prices drag down his approvals, took a victory lap on Wednesday, tweeting, “More than half of all gas stations across the United States now offer gas for less than $4 a gallon.”
The administration has frequently emphasized the role the invasion of Ukraine played in the price hikes, branding it “Putin’s price hike,” as well as castigating the oil industry for the number of unused leases it currently owns on federal lands.
However, De Haan said a number of factors could lead to a rebound in prices.
“The underlying question is, is Mother Nature going to turn up Category 4 or 5 hurricane into the Gulf of Mexico?” De Haan said. Gulf hurricanes have “time and time again” taken platforms and refineries out of commission for as long as four to six weeks, he noted.
Gladden was more sanguine on the dangers of hurricane season, saying the industry is “hoping for the best during hurricane season, but obviously we’re prepared.”
However, he added, “the thing to remember is that even just the threat of a hurricane can cause crude oil production to shut down, particularly on the Gulf Coast. And so even just shutdowns or preventative measures can also restrict supply and cause prices to rise.”
Another factor that could cause prices to increase again, De Haan noted, is the relative lack of action from OPEC to increase supply.
Earlier Wednesday, OPEC announced it would increase production only slightly, with 100,000 more barrels a day. The announcement came shortly after Biden met with Saudi Crown Prince Mohamed bin Salman and appealed for the kingdom’s help in stabilizing global oil markets.
There’s also the possibility that fears of a recession don’t materialize.
“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 supplies could also take a hit moving into fall and winter as demand spikes.
“As agricultural consumption goes up and people start filling their heating oil tanks, then diesel could see pretty apocalyptic numbers later this year if things don’t go well,” he said.
However, during the same period, the downward trend is likely to persist on the gas side of the equation, De Haan said.
“Gasoline may see lower prices into the fall if we can avoid things like hurricanes or other unexpected outages with refiners and things like that.”