Gas Prices Continue to Fall Rapidly - Thanks Joe!
Gas prices at the pump have declined for 7 straight weeks and energy experts believe they could fall further as the summer driving season comes to a close. The median price has now fallen below $4 a gallon and the average price has declined by 86 cents since June.
The headline, of course, is a bit of sarcasm. As we have explained before, the President wasn't responsible for price increases in the Spring and he can't claim credit for decreasing prices now. It's simple market economics.
Gas prices shot up this Spring because demand increased as the pandemic waned and economic activity boomed. The situation was further exacerbated by the Russian invasion of Ukraine.
Illuminate: When the pandemic first hit the US in March 2020, demand for gasoline plummeted as Americans started working from home and dramatically reduced their vacation travel. The typical driver cut their driving in half, according to the AAA. That sharp decline in demand caused gas prices to sink below $2.00 in the Spring of 2020. In response, the Organization of the Petroleum Exporting Countries [OPEC] and other oil-producing nations slashed production, in order to stabilize falling prices.
Reuters: "Like much else during the pandemic, what was happening in fuel markets was unprecedented. Demand had fallen so sharply as people stopped travelling, the oil industry simply couldn't cut production fast enough to match it. ... There was so much oil there was nowhere to put it, and in mid-April 2020 the price of a barrel of West Texas crude went below $0 as sellers had to pay get rid of it."
However, as the global economy recovered from the pandemic, OPEC and other producers were slow to increase the global supply. OPEC didn't start increasing production until July 2021 and by then the price of oil was surging. This year US oil producers also began increasing production to take advantage of rising prices, but it's going to take months for that oil to hit the market. And while producers were ramping up, Vladimir Putin invaded Ukraine, and Western nations responded by sanctioning Russian energy exports. That further reduced the flow of oil globally and spooked the oil futures market.
Then, in the Spring as prices rose, drillers and refiners continued to ramp up oil production to maximize profits, just as car owners, here and abroad, cut back on driving to save money. President Biden does deserve some credit for the unprecedented release of oil from the Strategic Petroleum Reserve, but that's probably a small factor. In addition, the oil futures market collapsed as investors eyed a possible global recession, and a new report from the US Energy Information Administration showed that oil and gas inventories are increasing faster than expected as demand decreased.
All these factors combined to lower prices at the pump this summer, much to the chagrin of Republicans. If the global economic situation weakens this Fall, it's quite possible that we will see further declines. Joe Biden can't take credit, but Democrats will surely welcome the news heading into the midterm elections in November.
By: Don Lam & Curated Content