On the Fourth of July, gas prices experience an almost unprecedented drop

The roads will be crowded this Fourth of July weekend, but commuters have at least one thing for them: much cheaper gas prices than a year ago.

a 43.2 million Americans are expected to travel by car on the weekends, according to AAA. This is 2.4% higher than last July 4th.

However, gasoline prices are much lower. The national average for regular gasoline It fell to $3.55 Gallon on Thursdays according to AAA. A year ago, regular gallons sold for an average of $4.87 a gallon.

This kind of price drop is almost unprecedented.

During the week ending June 26, gas averaged $3.57 a gallon, according to the US Energy Information Administration. That’s down $1.30, or 27%, from the same period last year.

This is the second-largest one-year price drop in the week leading up to the Fourth of July since EIA data began 33 years ago, according to John LaForge, who leads real asset strategy for the Wells Fargo Investment Institute.

The single largest 12-month decline occurred during a historical downturn: the Great Recession. Gas prices fell by $1.45 a gallon, or 35%, between June 30, 2008, and June 29, 2009.

“This is awesome. Gasoline prices are a key economic indicator for many Americans,” said Patrick De Haan, GasBuddy’s head of petroleum analysis.

De Haan said the average driver is spending $20 less per fill-up than it was at this point last year.

Although pump prices are down from record levels last year, gas prices were cheaper in the summer of 2021 and certainly in 2020 when Covid-19 shut down large sectors of the economy.

Pump prices are dropping in california, ohio

However, over the past 12 months, gas prices have fallen in all 50 states, according to AAA.

Drivers in Indiana enjoyed the biggest drop in gas prices over the past year, with the state average down $1.58 a gallon. Other states that saw significant drops in gas prices include Ohio ($1.48), California ($1.47) and Illinois ($1.47), according to AAA.

The lowest drop in gas prices in 12 months was in Washington state, where the average fell by just 50 cents a gallon. Washington recently replaced California With the unwelcome distinction of having the most expensive gas prices in America.

Of course, consumers are still grappling with the rising cost of living at the grocery store, when shopping for cars and paying rent.

“Americans have been hit by many other bullets,” de Haan said. “They may save at the pump but spend more elsewhere.”

High inflation elsewhere is a major reason why De Haan expects gasoline demand during the Fourth of July to be 5% to 10% below 2019 levels. This is despite the fact that AAA expects the number of people to drive to their destinations this weekend is 4% higher than in 2019.

Why are gas prices low?

The decline in gas prices is an undeniable positive factor for consumers. However, not all of the factors behind the decline are encouraging.

After a sharp rise last year, oil prices have slumped in part due to concerns about the Federal Reserve’s rate hikes sending the economy into recession.

Another factor: Despite fears of unrest, Russia’s oil exports have not been derailed by the war in Ukraine or sanctions from the West.

“We think prices are stuck in the near term, as markets weigh concerns about an expected recession against global supplies,” said Wells Fargo’s LaForge.

But beyond that, LaForge expects the oil market to get tighter and “pull prices higher” next year.

One wildcard is the war in Ukraine in the aftermath of Russia’s short-lived Wagner uprising that poses a challenge to Vladimir Putin’s hold on power.

So far, the oil market has The unrest in Russia was largely ignoredas traders bet that the country’s exports will remain intact.

But De Haan of GasBuddy says Russia remains a risk to gas prices.

“The situation is still like a powder keg. It could lead to a further explosion in oil prices,” he said.

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