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Gasoline Prices Fall Below $4 a Gallon but Many Americans Still Fear a Possible Recession

New York Times

Last Updated: August 12, 2022, 11:58 IST

Washington

A Bolla Market in Brooklyn, where regular unleaded gas had dipped below $4 a gallon, on Aug. 9, 2022 (Image: NYT)

A Bolla Market in Brooklyn, where regular unleaded gas had dipped below $4 a gallon, on Aug. 9, 2022 (Image: NYT)

Even though gas prices are still higher than it was a year ago, at $3.99, it has fallen below the peak of nearly $5.02 in mid-June

Gas prices in the United States fell below $4 a gallon Thursday, retreating to their lowest level since March, a sign of relief for Americans struggling with historically high inflation and a political boost for President Joe Biden, who has been under pressure to do more to bring down prices.

The national average cost of a gallon of regular gasoline now stands at $3.99, according to AAA. That’s still higher than it was a year ago but well below a peak of nearly $5.02 in mid-June. The average price has fallen for 58 consecutive days.

Energy costs feed into broad measures of inflation, so the drop is also good news for policymakers who have struggled to contain rising prices. It is a welcome development for Biden, who has spent recent weeks trumpeting the drop in gasoline prices, even as he pledges to do more to bring costs down. Biden has criticized oil companies for their record profits, and this year he released some of the nation’s stockpile of oil in an effort to reduce price pressures.

More than half the cost of gasoline at the pump is determined by global oil prices, which have tumbled to their lowest point since the war in Ukraine began in February — a drop that reflects in part the growing concern of a worldwide recession that will hit demand for crude.

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The decline below $4 per gallon “is providing much needed breathing room for families across the country,” Cecilia Rouse, the head of the White House’s Council of Economic Advisers, said in a statement, citing it as one example of recent “encouraging economic developments.”

For consumers, falling gas prices offer a respite from a shaky economy, rapid inflation and other worries.

“We have new rising diseases and inflation, and people expect a recession,” said Zindy Contreras, a student and part-time waitress in Los Angeles. “If I just had to not worry about my gas tank taking up $70 that’d be a huge relief, for once.”

Contreras has been filling up her 2008 Mazda 3 only halfway as a result of the higher prices, costing her $25 to $30 each visit to the pump, and she had found opportunities to carpool with friends. These days, Contreras usually gets gas twice a week, driving 15 miles to and from work each week and an additional 10 to 50 miles a week, depending on her plans.

The national average price masks wide regional variations. Prices vary according to the health of local economies, proximity to refineries and state taxes, said Devin Gladden, a spokesman with AAA.

In California, for example, regulations to limit pollution make driving more expensive, with the average price of gas $5.38 a gallon in the state and some counties recording averages well over $6. In Georgia, which has lower gas taxes and is close to refineries, the average price is about $3.55 a gallon.

But broadly speaking, the general drop in gas prices reflects a number of factors: weaker demand because of high costs, a sharp decline in global oil prices in recent months and the suspension of taxes on gasoline in a handful of states.

Nearly two-thirds of people in a recent AAA survey said they had altered their driving habits because of high prices, mostly by taking fewer trips and combining errands. On Thursday, OPEC revised down its forecast for global oil demand this year.

Regardless of the causes, the lower prices are a welcome change for drivers for whom the added expense — often $10 to $15 extra for a tank of gas — had become yet another hurdle as they sought to get their lives back to normal as the coronavirus pandemic eased.

“The affordability squeeze is becoming very real when you see these high prices at the gas pump,” said Beth Ann Bovino, the U.S. chief economist at S&P Global. “So, in that sense, it’s a positive sign certainly for those folks that are struggling.”

That cushion — cash not spent on gasoline that can go elsewhere — also extends to businesses, particularly as the price of diesel fuel drops. Diesel, which is used to fuel, for instance, farm equipment, construction machinery and long-haul trucks, has also fallen from a June record, though at a slower pace than gasoline prices.

The drop in the price of gas is also good news for the economy, as businesses face less pressure to pass energy costs on to their customers — a move that would add to the country’s inflation problem.

The government reported this week that consumer price inflation slowed in July to a still-high annual rate of 8.5%, down from 9.1% in June, thanks largely to the drop in gasoline prices. If it persists, the slowdown in inflation could allow the Federal Reserve to ease up on its campaign to raise interest rates.

Even as they watch prices fall, some wonder if this is a temporary reversal.

“I’m not ready for it to go a little higher again and then I’m over here struggling to fill up my tank,” said Christina Beliard, a 27-year-old fashion influencer in Bridgeport, Connecticut.

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 drove before. For work, she sometimes needs to drive to locations for her accounts on TikTok and Instagram, platforms on which she promotes brands, and to attend events in New York City, which is about 60 miles from her home.

Connecticut suspended its tax on gasoline through November. And Beliard, who had been spending from $95 to $100 a week to fuel up her Jeep, is now paying $74 to $80. Still, she is weary of the high tab.

“I’m trying to figure out, how long is this going to last?” she said.

That’s a difficult question to answer. Oil prices are volatile and subject to myriad forces, many of which are hard to predict.

There are several reasons that they could rise again: The course of the war in Ukraine could further hamper global oil supplies, energy investors’ views on the economy could change or hurricanes later this year could damage Gulf Coast refineries and pipelines, choking off supplies.

For now, though, the steady drop in the cost of fuel offers Americans a reprieve. “If gasoline prices stay at or near the levels they have reached, that would mean much more cushion for households,” Bovino said.

Isabella Simonetti@c.2022 The New York Times Company

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first published:August 12, 2022, 11:58 IST
last updated:August 12, 2022, 11:58 IST