It’s not entirely clear whether President Joe Biden’s latest announcement that he is releasing oil from the nation’s emergency reserves will help drive down gasoline prices. But the good news for drivers, and for Biden, is that several factors point to lower prices at gas stations.
The national average stood at $3.85 a gallon on Wednesday, down 2 cents from Tuesday and down 7 cents from the last week. Much of that decline was due to a sharp drop in prices in western states, where prices had soared to near-record levels earlier this month.
One of the biggest factors in the recent rise in prices has been the shutdown of US refineries either for regular maintenance or after accidents, such as a refinery explosion near Toledo, Ohio, last month. . But several West Coast refineries that had been out of commission have returned to operation, and that has caused gasoline prices west of the Rockies to plunge, lowering the national average.
In the last week alone, the average price in California has dropped 30 cents a gallon, and there has been a 25-cent drop in Oregon and a 20-cent drop in Washington and Nevada.
Although refineries dealing with accident repairs won’t be coming back online anytime soon, those that had been shut down for scheduled maintenance are now close to resuming operations, according to experts. That will likely lead to lower prices in other parts of the nation, even if the drop isn’t as steep as it has been in the West.
“What’s been happening in the West is a head start and it can happen in other parts of the country,” said Tom Kloza, global head of energy analytics at OPIS, which tracks prices at 130,000 U.S. gas stations to AAA.
Oil and gas futures fell in trading on Tuesday after news broke that Biden would announce the release of 15 million barrels of oil from the nation’s Strategic Petroleum Reserve. But that represented just another phase of the planned release of 180 million barrels over six months that was announced in late March.
Oil analyst Andy Lipow said markets initially moved due to confusion over whether or not more oil would come out of the strategic reserve.
“The market has been quite volatile,” Lipow said. when it started to be sold [Tuesday]caused a liquidation [of oil futures].” Oil and gas prices recovered modestly in trading on Wednesday.
Drivers enjoyed a prolonged and steady drop in gas prices that saw the national average fall for 98 straight days, from a record high of $5.02 a gallon in June to bottoming out at $3.68 a gallon a month ago. But with the price rising nearly 18 cents a gallon, or 5%, in the month since then, and with the midterm elections just weeks away, Biden felt pressure to take action.
“Politicians take credit when gas prices go down and blame it when they go up,” Lipow said, “even if they have little to do with the actual price movement.”
Whether or not Biden’s decision to release oil from the SPR had a significant impact, there are several other factors driving future prices down. One is the seasonal decline in demand at the end of the summer driving season, along with the regularly scheduled end of regulations requiring cleaner, more expensive gas blends to be sold during the summer to combat smog.
But an even bigger factor is growing concern that the US and other global economies could soon slip into recession. Recessions are a sure way to reduce demand for gasoline and oil, as fewer people have jobs to commute to and less money to spend on travel.
“When the world goes into a recession and demand for basic products falls, the market is unforgiving,” Lipow said.
Correction: An earlier version of this article misidentified the day of the week that the national average price of gasoline was $3.85 per gallon and the day before.