U.S. gas prices fell below $4 a gallon on Thursday, retreating to their lowest level since March, a drop that has brought relief to Americans struggling with skyrocketing costs for everything from groceries to rent.
The national average cost of a gallon of regular gasoline is now $3.99, according to AAA. That’s higher than a year ago, but still well below a peak of nearly $5.02 in mid-June. Energy costs are included in broad measures of inflation, so the drop is also good news for politicians who have struggled to contain price increases and for President Biden, who has promised to lower gas costs.
The national average includes a wide range of prices, from nearly $5 per gallon in Oregon and Nevada to about $3.50 in Texas and Oklahoma. But broadly, the decline reflects a number of factors: weaker demand, because high costs have kept some drivers off the roads; a sharp decline in global oil prices in recent months; and the fact that a handful of states have suspended taxes on gasoline.
Regardless of the reasons, the lower prices are a welcome change for drivers for whom the extra expense — often an extra $10 to $15 for a tank of gas — had become another hurdle as they tried to get their lives back to normal after the coronavirus pandemic.
“We have new diseases rising and inflation, and people are expecting a recession,” said Zindy Contreras, a student and part-time waitress in Los Angeles, where gas prices are close to $5.40 a gallon. “If I just didn’t have to worry about my gas tank taking up $70, that would be a huge relief for once.”
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Mrs. Contreras has filled up her 2008 Mazda 3 only halfway as a result of the higher prices, which have cost her $25 to $30 each visit to the pump, and she had found opportunities to carpool with friends. These days, Ms. Contreras usually gets gas twice a week, driving 15 miles to and from work each week and another 10 to 50 miles a week, depending on her schedule.
“The affordability squeeze becomes very real when you see these high prices at the gas pump,” said Beth Ann Bovino, chief U.S. economist at S&P Global. “So in that sense, it’s certainly a positive sign for those people who are struggling.”
That cushion — cash not spent on gas that could go elsewhere — also extends to businesses, especially as the price of diesel also falls. Diesel, which is used to fuel things such as farm equipment, construction machinery and long-haul trucks, has also fallen from a record high in June, but at a slower pace than petrol prices.
The fall in the price of gas is also good news for the economy, as companies face less pressure to pass on energy costs to their customers – a move that will add to the country’s inflation problem.
The government reported this week that consumer price inflation slowed in July to an annual rate of 8.5 percent, down from 9.1 percent in June, largely thanks to the fall in gasoline prices. If it persists, the slowdown in inflation could allow the Federal Reserve to ease its campaign to raise interest rates.
It would also serve as a victory of sorts for Mr. Biden, who has spent the past few weeks trumpeting the drop in gas prices, even as he says he expects to do more to bring down costs. Mr. Biden has criticized oil companies for their record profits from high oil and gas prices, and this year he freed up some of the nation’s oil reserves in an effort to prevent prices from jumping too quickly.
“I’m going to continue to do what I can to bring down the price of gas at the pump,” he said at a briefing in late July.
Even as they see prices falling, economists and consumers say they wonder if this is a temporary reversal.
“I’m not ready for it to go a little higher again, and then here I am struggling to fill my tank,” said Christina Beliard, a 27-year-old fashion influencer in Bridgeport, Conn.
Mrs. Beliard bought a Jeep Wrangler last year, but now regrets the purchase because the vehicle is not as fuel efficient as the Toyota Camry she used to drive. To work, she sometimes has to drive to locations for her accounts on TikTok and Instagram, platforms where she promotes brands, and to attend events in New York City, which is about 60 miles from her home.
Connecticut is one of the states that suspended the tax on gasoline through November. And Mrs. Beliard, who had been spending $95 to $100 a week to fill up her Jeep, now pays $74 to $80. Still, she is fed up with the high profile.
“I’m trying to figure out how long this is going to last?” she said.
It is a difficult question to answer. More than half of the cost of petrol at the pump is determined by global oil prices, and these are volatile and subject to countless forces, many of which are difficult to predict.
Oil prices have fallen to their lowest point since the war in Ukraine began in February, a drop that reflects growing concerns about a global recession that will hit demand for crude. There are several reasons why prices could rise again: The course of the war could further hamper global oil supplies, energy investors’ views on the economy could change and hurricanes later this year could damage Gulf Coast refineries and pipelines, choking off supplies.
For now, however, the steady decline offers a reprieve for Americans worried about their finances as the economy slows.
“If gasoline prices stay at or near the levels they’ve reached, that will mean a lot more cushioning for households,” Bovino said.