US gas prices rise for the first time in 99 days

New York
CNN Business

The historic streak of falling petrol prices is over.

After falling every day for more than three months, U.S. gas prices rose — by a penny — to $3.68 a gallon, on average, on Wednesday, according to AAA.

That ends 98 consecutive days of falling pump prices, the second-longest such streak on record dating back to 2005.

The last time the national average price of gasoline rose was June 14, when it hit a record high of $5.02. Prices fell every day since then, and Thursday would have marked the 100th consecutive day of decline.

The drop in gas prices was driven by a number of factors, including stronger supply and weaker demand as drivers braced for high prices and an unprecedented release of emergency oil from the White House.

Another important factor that had led to lower gas prices: Growing concern about a global recession that could hurt demand for gas. People who lose their jobs don’t have to drive to work, and even those with jobs pull back on their spending during recessions.

The strong dollar also helped bring down the price of gas, because crude oil is priced in dollars. That means each dollar can buy more oil than it would if the value of the currency were stable or falling. The dollar index, which compares the value of the dollar to major foreign currencies, is up 15% this year. It also means that oil prices rise faster for countries that do not use the dollar, which dampens global demand.

At the same time, Russia’s oil flows have held up better than feared despite sanctions and the war in Ukraine. Russia’s invasion of Ukraine, and the sanctions that followed, helped trigger the sharp rise in oil and gas prices. The average price on the day of the invasion was $3.54 per gallon, only slightly lower than today. Russia’s announcement on Wednesday that it would increase its troop mobilization helped lift crude oil futures by 2% in global markets.

Gas prices are likely to stay relatively close to current levels in the short term, said Tom Kloza, global head of energy analysis for OPIS, which tracks gas prices nationally for AAA.

“I don’t think you’ll see a big move higher or lower,” he said recently, ahead of Wednesday’s modest price gain. He said competitive forces will affect prices in the short term.

US refining capacity remains limited. And OPEC along with other oil producing nations recently agreed to cut production. Both push prices up.

Meanwhile, seasonal factors, such as the end of the summer driving season and the annual end of U.S. environmental regulations requiring a cleaner, more expensive blend of gasoline during the summer months, could help ease prices. Also pushing prices down: Oil traders remain jittery about the state of the global economy.

“Crude has no speculative investment money behind it right now,” he said.

Wholesale gasoline futures point to sharply lower gas prices by the end of the year, with the possibility that gas below $3 a gallon could be commonplace in much of the country by then, Kloza said. But he warned “futures prices are a notoriously poor predictor of what the future will hold.”

Although gas under $3 remains rare — only 5% of America’s 130,000 gas stations sell gas for less than that price, according to OPIS — relatively cheap gas has become far more common with the months of decline. Nearly one in four stations nationwide sell gas for less than $3.25 per gallon, and 56% sell gas for less than $3.50 per gallon.

Cheaper gas has been a big boost to the US economy, easing inflationary pressures and giving Americans extra money to spend. Since the typical American household uses about 90 gallons of gas a month, the drop in gas prices saves those households about $120 a month from what they had been paying since the peak in June.

A one-cent increase in gas prices is not a meaningful change for most drivers, and prices could fall again as global economic concerns grow along with fears that demand for fuel will continue to decline.

But if gas prices start to rise, that could undermine the Biden administration and the Federal Reserve’s efforts to keep inflation in check. Falling gas prices are the only reason US consumer prices have held steady in recent months after rising sharply in 2021 and the beginning of this year.

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