The price of gasoline continued to drop this week and could continue to slide as inventories of gasoline and producers around the world continue to put out more crude. Additionally, Russia found buyers for its oil on the global market despite sanctions imposed after the invasion of Ukraine.
In the U.S. the national average for a gallon of gas at the pump dropped 10 cents per gallon this week to $4.113 on Friday. It was the 52nd consecutive day the country has seen a price drop for gasoline, according to AAA.
AAA reported gasoline prices have dropped by 14 cents per gallon since last Friday. One month ago, the average for American drivers was $4.80, representing a 16% reduction at the pump during the past 30 days and a sustained break in the upward trend that saw prices peak at $5.02 on June 14th.
Will trend continue?
Whether the downward price trend will continue will depend on the demand situation, according to AAA, which also noted the steady drop in gasoline prices could reverse with a “slight uptick” in demand.
“We know that most American drivers have made significant changes in their driving habits to cope with high gas prices,” AAA spokesperson Andrew Gross said. “But with gas below $4 a gallon at nearly half of the gas stations around the country, it’s possible that gas demand could rise.”
On Wednesday, the Energy Information Administration, or EIA, recorded a small increase in gasoline inventories of 200,000 barrels in the week ending July 29th, with production averaging 9.3 million barrels daily.
That increase compares to a 3.3-milllion-barrel draw the previous week.
Inventories of gasoline growing
Earlier this week, the EIA noted that gasoline demand had risen from 8.52 million barrels per day to 9.25 million barrels per day the previous week, but still 80,000 barrels lower than the same period last year. However, the AAA notes if that demand rise continues, price reductions at the pump may slow down.
Part of the increase come from expanding production by frackers in the U.S.
The website oilprice.com noted EIA’s inventory report this week is more conducive to continued price decreases for American drivers. While the previous week’s report showed a large decrease in stockpiles, this week’s report shows a slight increase, indicating more available supply.
Overall, crude has now give up all the gains triggered by Russia’s invasion of Ukraine in February, according to Bloomberg. Since peaking at more than $130 a barrel in March, the U.S. benchmark has been dragged lower by signs that Moscow is still getting its cargoes on the global market and escalating investor concern that global slowdown will erode energy consumption.
Bloomberg also reported prices falling below $90 a barrel “is quite remarkable given how tight the market remains and how little scope there is to relieve that,” according to Craig Erlam, senior market analyst at Oanda.
The countries belonging to OPEC, or the Organization of Petroleum Exporting Countries, also are scheduled to deliver additional crude oil, about 100,000 barrels per day in September, placing slightly more downward pressure on gasoline prices.
According to a new study from Insurify out this week, certain Southern and Midwestern states have seen gasoline costs decrease by at least 10% in the past month.