With the last several months delivering record-breaking fuel prices, as society endures what has undoubtedly been the largest spike in energy cost and inflation since the 1970s, everyone has been hoping to catch a break this summer. Some have even gotten theirs. While things are still looking exceptionally bleak in the long term, the United States appears to be enjoying a modest reprieve.
The Biden administration has mobilized Amos Hochstein, the special presidential envoy and coordinator for international energy affairs, to tell the corporate press that the government is now forecasting per-gallon pricing below $4.00. Considering how unpopular rising energy costs have made the White House, having an expert out there suggesting things are about to improve seems a rather standard play to make. But there’s real reason to believe him. The U.S. Energy Information Administration (EIA) has shown gasoline prices trending downward since late June and has been echoed by GasBuddy — which claimed national fuel prices have declined for five consecutive weeks.
“We’ve seen the national average price of gasoline decline for a fifth straight week, with the pace of recent declines accelerating to some of the most significant we’ve seen in years. This trend is likely to reach a sixth straight week, with prices likely to fall again this week. Barring major hurricanes, outages or unexpected disruptions, I forecast the national average to fall to $3.99/gal by mid-August,” said Patrick De Haan, head of petroleum analysis at GasBuddy. “So far, we’ve seen the national average drop for 34 straight days, with over 25,000 stations now back at $3.99 per gallon or less, and thousands more stations will join this week. In addition, we will see several states fall back under an average of $4.00, the majority being in the south, but that could spread to more states in the weeks ahead.”
That regional data is important because you might not even have noticed a decrease in your area. Anyone venturing more than 50 miles from home knows that pricing can vary immensely. This is due to a myriad of reasons including regional competition, local taxes, unique fuel blends, general demand, and how much work it takes to resupply that particular station. Having just spent some time in the boonies, I noticed a stark increase in prices at isolated truck stops vs the Flying J along the main highway. But the best I can say about my local station is that the price seems to have stabilized at the record-breaking highs we witnessed a few weeks earlier.
So are fuel prices really going down or are we just enjoying a respite from further increases? Well, according to AAA, the national average for fuel peaked on June 14th at $5.02 per gallon and has settled back down to a less-harrowing $4.52. Though that’s still a dollar more than the $3.16 per-gallon average enjoyed in July 2021 and over twice the $2.17 average witnessed in the summer of 2020.
“It’s not $5.00 anymore,” Hochstein told CBS on Monday. “It’s now $4.55. And I expect it to come down more towards $4.00. And we already have many gas stations around the country that are below $4.00. So we’re — we’re — this is the fastest decline rate that we’ve seen against a major increase of oil prices during a war in Europe where one of the parties in the war is the third largest producer in the world. So, these are extraordinary circumstances. We’ve taken very tough measures to address them right away. Both for the American consumer but really for the global economy too.”
He suggested Joe Biden’s trip to the Middle East set the stage for future oil negotiations, noting that the price per barrel had dropped and that Organization of the Petroleum Exporting Countries (OPEC) was plotting policy changes ahead of its big August meeting. While this is still assumed to result in an uptick in production, the timeline doesn’t necessarily mesh with Biden’s trip. Hochstein also praised the Biden administration’s decision to tap into the Strategic Petroleum Reserve (by 1 million barrels of oil per day) to aid the market.
The reserve was originally envisioned to keep the United States sanguine in times of extreme distress. While this certainly seems like a semi-plausible use case, Biden has still taken criticism for tapping in. Complaints usually include claims that this has done little more than aid highly profitable energy companies and some intense fury over reports of the president’s decision to sell 950,000 barrels to a state-owned Chinese firm in which Hunter Biden’s private equity firm held a $1.7 billion stake. An additional 4 million barrels are said to have been shipped to other nations, further enraging an opposition that already blames existing government policy for exacerbating the energy crisis.
While things are always a little more complicated than we’d like, gripes that the Biden administration’s policies aren’t helping the average consumer feel pretty valid. Comparisons have likewise been made to rising energy costs witnessed during the beginning of the Obama administration. Team Biden has unquestionably used Obama-era energy regulation as a blueprint for policy and has similarly filled its ranks with officials from the prior administration’s Rolodex.
Hochstein has served on numerous Congressional committees and was previously a lobbyist for domestic and international oil companies. However, he’s probably best known today for being an energy diplomat for the Obama administration and working in Ukraine.
My take is that plenty of developed nations have unsound energy policies (e.g. Germany) and that deciding where those ideas came from is slightly less important than fixing them. As things currently stand, the only group that’s actually suffering from these unprecedented fuel prices are regular people. Oil companies are enjoying record profits and the crisis has allowed government officials to make the kind of decisions that will ensure they’ll have cushy jobs waiting for them at the largest corporate entities on the planet.
As for fuel prices, a barrel of oil has gotten roughly $20 cheaper within the last month. That’s a good sign that things might be turning around. But we usually see the summer surge break eventually and that day may have come sooner than expected as plenty of people decided it was better to save money by driving less. Having lost their buying power over the last few years, far fewer Americans can afford to take vacations anymore. Lofty fuel bills may have simply exacerbated the trend, driving down demand. Though there’s nothing to suggest this will remain the case on a longer timeline. For most of the world, energy regulations are still poised to become even more stringent in the years ahead and that’s almost assured to result in prices climbing again.
[Image: Nithid Memanee/Shutterstock]
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One other factor is that the US Dollar is surging in value and oil is priced in dollars. It takes a more EUR, JPY, RMB to buy a barrel of oil than it did a few months ago and that’s pushing down demand as well.
This is correct. It should be noted that a strong dollar makes imports cheaper and exports more expensive, so a strong dollar does have some downsides – essentially you’re creating wealth elsewhere in the world at the expense of domestic production.
Other things that also bring down gas prices can be problematic.
For example, if we go into a recession, gas prices will fall because more people will be unemployed. The economic cost of people becoming unemployed is greater than the savings at the pump.
The last couple of times I topped off it was $50. Last night was only $20, so I guess it is coming down. And I’m sure it will never go back up HOW STUPID DO YOU THINK I AM, ExxonMobil?
In my region prices have remained high. Local journalists have written a few good news articles on the topic. Ironically, once those reports aired, the price has dropped somewhat.
Finally, I can trade my EV for a Raptor. M-ICE-G-A!
I think we still need to be cautious with price expectations. Oil is back to $104 after dropping to $92 last week and the problem is that the price per gallon/crude oil ratio is worse than in 2008. (For instance, oil was $140+ in then current dollars in 2008 but gas nominally peaked at 4.11 that year.) China’s economy has been weakened by lingering zero-covid, more reopening there can increase demand. It is possible with more production (and more refining) prices can find a lower plateau but I believe they will remain somewhat elevated.
Paid $5.39 this morning, though that’s already down from the prior peak.
Honestly it doesn’t affect me too much, because I’m lucky enough to live very close to work. That should be an option for more Americans, and the fact that it isn’t lets oil prices hold people hostage.
A) If you have chosen vehicle options for yourself which reduce your dependence on petroleum for transportation, a sincere THANK YOU from me and my family. We are not there yet for transportation but will be moving in that direction over time. (Wife and son plan on next vehicle purchase, daughter is a holdout.)
Much of my power equipment is electric now. I drove to the gas station the other day to get $9 of fuel for the gasoline pressure washer and was re-reminded of how much more convenient and affordable electricity is. (Not that electricity is perfect. Lesson learned: When using the rechargeable mower away from home, bring an extension cord to reach the shade — if you try to recharge at the customer’s outlet beside the back door on the hot brick patio next to the hot brick wall, the charger will think the battery is over temperature and won’t charge.)
B) If you have taken your fuel-guzzling vehicle and made modifications which further increase its appetite for petroleum, and take pride in how much you spend at the pump each week, a sincere no thank you to you. (Congratulations, people like you are probably roughly offsetting the efforts of people in group A.)
I do suspect that high fuel prices are a badge of honor for some people, even while they complain outwardly. (“I’m spending $150 a week to fill up my truck!”… bar girl pats his arm in comfort).
Nobody’s trading a RAM grocery-getter for a Prius, but there may be a few who really wish they could.
@SCE to Aux “Nobody’s trading a RAM grocery-getter for a Prius, but there may be a few who really wish they could.”
I’m seeing a large number of pickups collecting dust in people’s driveways. I doubt we will see a big shift in the pickup market yet. People are hoping these prices are temporary so will sit on those big pickups.
My new ZR2 diesel is getting 24 mpg (US) in town and 30 mpg (US) highway. I was getting 21 mpg (US) crawling around offroad. City and town MPG were based on tank fills and the offroad was based on the computer readout which reads a bit high.
@Lou_BC–Congratulations on your new Colorado. Did you sell your F-150 or did you keep it?
I cringed reading this, ToolGuy.
Why cringe? If you are currently buying petroleum for your vehicle, you should say a little thank-you to every Tesla you see on the road, and half a thank-you to Jeff S who is buying half as much gasoline as he used to.
I am moving to a condo in about a month and I have been getting rid of my gas powered outdoor equipment. I will take an electric power washer and an battery powered leaf blower with me along with my tools and that is all I need for equipment. As for vehicles I am mainly driving the hybrid Maverick getting 40 to 50 mpgs which I filled up at Sam’s Club for $4.29 a gallon so it is not that bad.
@Jeff S:
I suppose you saw the news of the hybrid Maverick recall. Thoughts?
@SCE, the latest fires are due to the internal combustion engine side of the vehicle rather than electrical in nature, and are therefore not to be feared. :-)
[Setting Ford Pro™ aside, is a hybrid the responsibility of Ford Model e™ or Ford Blue™? Are the grumpy curmudgeons at Ford Blue™ sabotaging the good-looking new hires at Ford Model e™ by sending them faulty engine components? Enquiring minds want to know.]
https://www.ford.com/ford-blue-ford-model-e/
West coast: Gas prices dropped from about $7 to $6.20 for premium. 2019 prices were in the mid $4’s.