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Filling up your gas tank isn’t as painful as it used to be.
Gasoline prices, which reached a record high at the start of the summer, have fallen sharply in recent weeks. They are now below $4 a gallon in some parts of the country, although the national average remains above that level.
It’s a relief for motorists – and for inflation, which hit its highest level in four decades in June.
How much have the prices fallen?
According to the American Automobile Association, the national average gas price was $4.08 on Saturday. That’s down nearly a dollar since mid-June, when pump prices hit a record high of $5.01 a gallon.
Some parts of the country, such as Texas, saw an even steeper decline, providing relief to drivers who had seen prices rise earlier this year after Russia invaded Ukraine.
“I filled up yesterday and it was $3.35. So yeah, I was excited about it,” said Linda McDaniel, who drives 60 miles a day to work in San Antonio. “Because I have such a commute, I drive a Honda Civic, which gets pretty good gas mileage. But with those higher prices, it really cost a lot more to fill up.”
What’s behind the sharp drop in gasoline prices?
It’s partly a function of supply and demand.
When pump prices rose above $5 a gallon, drivers adjusted their behavior, trying to limit how much they drove. They carpooled, combined errands and cut out unnecessary trips.
McDaniel actually canceled a road trip to Colorado this summer.
Gasoline consumption in the United States has been about 9% lower in recent weeks than it was last summer – quite a dramatic drop in demand.
At the same time, domestic crude oil supply increased by more than 6% compared to a year ago.
Growing concerns about a global economic slowdown also weighed on crude oil prices, which are about half the cost of gasoline.
All of this is a recipe for lower prices at the pump.
“Americans will collectively spend $340 million less on gasoline today than they did on June 16, when prices peaked,” said oil analyst Patrick De Haan of the price-tracking website. GasBuddy.
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What does this mean for inflation and the cost of things?
Lower gas prices will certainly help in terms of the cost of living.
Annual inflation in June reached 9.1%, the highest since the end of 1981, and gasoline prices were a major driver of this increase.
The problem is that other prices have also climbed, including some that are stickier than gasoline, which tends to bounce up and down.
McDaniel, for example, rents a few storage units and says the rent has gone up by $100 a month. She’s also worried about her electric bill because her air conditioner has been working overtime in the Texas heat.
“It’s been in the 100s since May,” McDaniel says. “So the electric bills have been out of this world.”
So far, consumers have seen little disruption in the cost of groceries or housing, both of which represent a larger share of the typical family budget than gasoline.
So while many drivers will be grateful for the cheaper gas, it’s not a panacea against inflation.
“Yeah, that’s a welcome relief,” McDaniel said of gasoline prices. “But I mean, you can definitely see [inflation] in just about everything. Like in our soda machine, the price went up 25 cents overnight. Every little thing you notice increases. Even a pack of chewing gum went up 20 cents.”
Where do gas prices go from here?
Pump prices could fall further in the near term, but it’s harder to say what will happen later this year.
GasBuddy analyst De Haan predicts the national average gasoline price will drop below $4 a gallon in the coming days.
But he warns that there are wildcards. A hurricane in the Gulf of Mexico, for example, could knock out drilling rigs or refineries, reducing gasoline supplies.
Geopolitical threats in Europe or Asia could also drive gasoline prices up again.
All of this makes it hard to tell if pump relief is here to stay.