Gasoline was a major reason U.S. consumer prices were 9.1 percent higher in June than a year earlier, the biggest annual increase in four decades. But now natural gas prices have fallen for 28 straight days, the biggest decline since the collapse of energy demand in early 2020 as the Covid-19 pandemic crippled the economy. Energy analysts say American consumers are spending $140 million less on gas every day than they did a month ago. The trend could easily reverse, especially if a hurricane hits a Gulf Coast refinery, as global oil reserves remain fairly tight. But for now, the nation’s reserves are rising slowly, partly due to the government’s continued oil releases from its strategic oil reserves and reduced consumption. The national average price per gallon of regular gasoline on Wednesday was $4.63, down more than 2 cents from Tuesday, according to the AAA auto club. Prices have fallen 15 cents in the past week and 38 cents since four weeks ago, when the average price rose to just over $5 a gallon. The decline was particularly sharp in Texas, Ohio, Illinois and California, all economically important states, where prices fell 16 cents or more in the past week. President Biden was quick to announce the reduction in natural gas prices, as their rise was a political risk for him. “Over the past 30 days, the average price of natural gas has dropped 40 cents a gallon,” he tweeted. “This is breathing room for American families.” Noting that oil prices have fallen faster than fuel prices, he urged oil companies to pass on their savings to consumers. Gasoline prices are especially important for lower-income families, who generally drive longer distances to work and own older, less fuel-efficient vehicles. But prices at the pump also frame consumer perceptions of inflation more broadly because they see the ups and downs on street corners every day. Drivers are starting to notice the difference and like what they see. “There’s always the fear that prices will go up but they’ll never go down,” said Melanie Wilson-Lawson, a health science professor, as she filled up her gas tank at a gas station outside Houston. “But I see a significant difference now. It’s huge.” That helps ease her financial insecurity, which had prompted her to cut back on eating out in recent weeks. Ms Wilson-Lawson said she hoped Mr Biden’s talks on his current trip to the Middle East would prompt oil producers to increase supplies and lower prices. But how much more Saudi Arabia and other Middle Eastern nations can produce, even if they want to, is questionable. Production in many countries, particularly Libya, has been hampered by political unrest. Fuel affects the prices of all goods shipped, especially food. Profits for farmers, construction companies and airlines depend heavily on fuel costs, especially diesel and jet fuel, which are falling but at a slower rate than gasoline. The national average price for diesel, at $5.61 a gallon, is 16 cents lower than a month ago. The 3 percent reduction for diesel compared to 7 percent for gasoline. Wholesale jet fuel prices, which do not include taxes like other fuels, fell about 11 percent in the past month. A major reason for the slower decline in domestic diesel prices is a large increase in exports to Europe to offset reduced supply from Russia since its invasion of Ukraine in February. Imports have shrunk gradually since the global diesel market has tightened. The drop in prices at the pump followed a slide in global oil prices, which have been falling for the past month amid mounting signs that the global economy is slowing. Fears that tougher Western sanctions on Russia would drastically reduce global oil stocks have been overblown since Moscow managed to replace European markets with sales to China, India and South America. Meanwhile, expectations that the economy of China, the largest crude importer, would recover have also not been met due to lockdowns in major cities in response to the continued rise of Covid-19. Patrick DeHaan, head of oil analysis at GasBuddy, a Boston-based firm that tracks fuel prices, said the trend of lower gasoline prices could continue for a fifth week as oil prices – which have fallen below from $100 a barrel – not rising $105. “We’re not completely out of the woods yet,” Mr De Haan said. “There remains the risk of a price spike that could take us to new record highs in August should disruptions occur. It could be a wild ride, but for now, the drop in the pump will continue.” Gasoline price fluctuations typically trail oil prices by about a week because oil must be processed and refined before it reaches gas stations, which base their retail prices on the wholesale price. Oil prices have been particularly volatile lately. They fell more than 7 percent on Tuesday and were slightly higher on Wednesday. The price of Brent crude oil, the international benchmark, fell from a peak of $140 a barrel shortly after the invasion of Ukraine, while the US benchmark, West Texas Intermediate, hit a peak of $130. Both were below $80 at the start of the year. A report by ESAI Energy, an analysis firm, said on Wednesday that the company expected a global surplus of four million barrels a day in a market of about 100 million barrels a day in the second quarter. “This is a significant drop in demand,” said Sarah Emerson, president of ESAI. Beyond demand, the surplus reflects releases of strategic stocks by various countries, including the United States. These releases will eventually run out and stocks will need to be replenished in the future, adding a new source of demand as early as next year. A recovery in demand in China is likely to happen sooner or later, although Chinese inventories are currently high. Oil production is rising in the United States — although it remains below pre-pandemic levels — as well as in Guyana, Brazil and some other countries. Oil companies are wary of drilling too fast, in part because they fear a sudden drop in prices. Many energy experts believe the price drop is temporary. “It’s a nice little respite in the middle of summer, based on more supply and less demand,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service. “But I’m very, very reluctant to say we’re not going to see $5 gas again. A hurricane would be the mother of all monkey wrenches for this more modest market.” But for now, Mr. Kloza said, high prices in recent months appear to have affected driving decisions. An Energy Department report released Wednesday showed gasoline demand in recent weeks had fallen by 1.35 million barrels per day, or more than 10 percent. Gasoline inventories last week rose 5.8% after falling 2.5 million barrels the previous week. This suggests that prices will continue to fall in the coming days. “Gasoline inventories are falling to lows quickly as demand continues to be very weak,” according to a Citigroup report published on Wednesday, which also noted a rebound in diesel and jet fuel inventories. “This is against a global backdrop of uncertainty – geopolitics, weather, pandemic variants, recession – that points to a volatile summer, but ultimately we’re thinking of a bearish path for energy prices.” Prices of other economically sensitive commodities, such as copper, have also fallen in recent weeks. But with a gallon of gas still about $1.50 higher than it was a year ago, not everyone is feeling better at the pump. “Honestly, I didn’t notice,” said Doug Johnson, a sales manager for a pipeline services company, filling his truck outside Houston on Tuesday. “You’re talking about cents, and I’m talking about dollars. We made a conscious decision not to take a vacation this summer.”
