The average price of gasoline nationwide slid under $4 per gallon for the first time since early March as the Russian invasion of Ukraine sent the price of crude oil soaring on global markets.
AAA reported since Monday, the national average for a gallon of regular gasoline dropped 6 cents to $3.99.
The national average has not been below $4 per gallon since March 5, leading the national average to a new all-time high earlier the summer.
According to new data from the Energy Information Administration (EIA), gas demand increased from 8.54 million barrels per day to 9.12 million last week. However, the rate is 307,000 barrels lower than last year.
Moreover, according to EIA, total domestic gasoline stocks decreased to 220.3 million barrels. Although gasoline demand has increased and supply has tightened, lower oil prices have helped lower pump prices.
More production blunts oil shock
The Baker Hughes Rig Count, which tracks the number of active drilling rigs operating in the U.S., increased by 56 percent. There are now 764 active rigs working in the U.S., 273 more than were active a year ago, according to Baker Hughes, which is closely tied to the oil industry.
In addition, the higher prices worldwide have led to a stabilization of output by the so-called frackers, who are now forced to pay attention to the bottom line since many of the wells have been taken over by hedge funds and other investor groups that pay close attention to their returns.
In addition, output from fracking in North Dakota was reduced last spring by power outages brought on by a blizzard, which shut down production for weeks.
With the frackers stepping up production and the rig count rising, the net result is a steady increase in the crude oil production in the U.S., according to the EIA.
The Biden administration also has buffered the price of crude from the shock created by Russian invasion of Ukraine with releases from the U.S. national oil reserves.
Further declines?
If oil prices continue to decline, drivers will continue to see pump prices decrease. However, Patrick DeHaan, an analyst with GasBuddy.com, cautioned during an interview on NPR, the Atlantic Hurricane season, which can send storms sweeping through the Gulf of Mexico, could raise prices in the short term.
Crude prices also rose a bit this week after the U.S. Bureau of Labor Statistics reported a smaller than expected increase in inflation last month at 8.5 percent. The rise in market optimism helped to boost prices despite EIA reporting that total domestic crude supply increased by 5.4 million barrels last week.
The rising price of gasoline and crude oil has been a key factor in the rising rate of inflation since it pushes up the price of everything from the cost of freight and distribution to the price of food and airline tickets, according to analysts.
The EIA noted gas demand dropped from 9.25 million barrels per to 8.54 million last week. The rate is 1.24 million barrels lower than last year and in line with the need at the end of July 2020, when COVID-19 restrictions were in place and fewer drivers hit the road, AAA said.
The lower prices spread unevenly across the country
Prices is California, which historically has always had the most expensive gasoline, still exceed $5 per gallon but have retreated from the more than $6 per gallon, which prevailed in the state’s urban areas earlier this summer.
However, the price of gasoline has dropped across the broad mid-section of the country, stretching from Colorado to West Virginia, AAA reported.
Since last Thursday, the largest decreases of at least 17 cents per gallon have been in Colorado, Arizona, Illinois, Maine, Ohio, Kansas, West Virginia, Wyoming, Arkansas and Indiana.
Historically, the price of gasoline is not much higher than it was during the summer of 2008 on the eve of the Great Recession in 2008 when it peaked at $4.11 per gallon, according to Business Insider.
However, gas prices have become a political issue as Republicans blame the Biden administration for the higher prices, despite impact of the Russian invasion on global prices.
