The 99-day slump in gasoline prices – a streak that gave consumers a glimmer of hope that smoldering inflation might subside – is over, with pump prices still much higher than they were a year ago.
The national average price of a gallon rose by less than a penny on Wednesday, to $3.68 a gallon, according to the AAA. This is below the record average of $5.02 in mid-June.
The question now is whether Wednesday’s surge was just a passing picture or a prelude to a return to high prices. The answer is important to motorists and President Joe Biden, who took credit for lowering prices by releasing millions of barrels of oil from the country’s reserves.
The 14-week price drop was the longest streak since 2015.
Gasoline prices mostly reflect trends in global oil prices, and crude oil – both US benchmark and international Brent crude – has been falling since mid-June due to growing fears of a global recession that would reduce energy demand.
Many energy analysts believe that prices are more likely to rise than fall in the next few months. However, changes in sentiment toward the economy, Russia’s war against Ukraine, and even hurricane season—always a threat to disrupt refineries along the Gulf Coast—make predictions uncertain.
“I doubt we’ll see volatile gasoline prices until the end of the year with some down days and up days,” said Tom Kloza of the Oil Price Information Service. He predicted that the next series would be a series of price increases early next year, driven by investors, speculators and “fear that there isn’t enough fuel to go around.”
Prices will head higher once withdrawals from the US Strategic Petroleum Reserve — 1 million barrels per day for six months — expire this fall, said Phil Flynn, an analyst at Price Futures Group.
“The market is going to start pricing that, and the refineries aren’t going to get that cheap oil out of reserve,” Flynn said. “The odds are that we will see a significant rise in oil prices with the onset of winter.”
Some companies, such as airlines, have been able to pass on higher fuel prices to their customers. Others couldn’t do it.
“We’re bearing for the farmers, we can’t raise (prices) for the farms because they’re also suffering,” said Mike Mitchell, co-owner of Mitchell Milk Hulling, which moves about 10 million pounds of milk a year from farms in the northwest. Pennsylvania.
The company’s seven trucks burn about $20,000 a month in gasoline, and lower gas prices this summer have provided only limited relief.
“Everything else you buy goes up,” Mitchell said. “Every part of the truck has doubled, almost.”
Al DeGennaro, attorney for waste transport contractor JP Mascaro in Pennsylvania & Sons, said high gas prices have taken its toll, and its unpredictability is hard to deal with.
“It creates uncertainty about how to bid in the future…a lot of government contracts span three to five years,” said DeGennaro, whose company has a fleet of about 300 trucks.
The nationwide average price rose to more than $5 a gallon — and over $6 in California — in June, as an economic recovery and increased travel boosted demand for gasoline, and the Russian war in Ukraine sent oil prices soaring.
The price hike caused financial hardship for families and a political headache for the Biden administration. With the congressional elections less than two months away, it’s hard to know whether voters will reward Biden and Democrats for the recent drop in prices — down $1.34 a gallon from the record set on June 14 — or blame them because prices remain. Much higher than the $3.19 average one year ago.
Besides releasing oil from the strategic reserve, Biden has pressured other oil-producing nations to increase production, and clashed with oil company executives after accusing them of making inappropriate profits while Americans struggled with high pump prices.
“Every time prices drop, they take a victory run, even though prices are much higher than they were when he took office,” analyst Flynn said of management officials.
US and international oil prices rose above $120 a barrel in June but have fallen since then. On Wednesday, West Texas Intermediate crude was trading around $83, while international benchmark Brent crude was around $90.
Unexpected events can affect gasoline prices. BP’s refinery in Toledo, Ohio, was closed Wednesday after an explosion and fire killed two workers. There are several weeks left at the height of hurricane season in the Gulf of Mexico. The National Oceanic and Atmospheric Administration says the probability of increased hurricane activity this year is 65%.
Mark Scolvo in Harrisburg, Pennsylvania, contributed to this report.
Copyright © 2022 by The Associated Press. All rights reserved.
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