Gas prices have fallen below a five-month low but remain above 2021 levels.
Key details
The national average price for a gallon of gas dropped to $3.99, the American Automobile Association reported on Thursday. Gas prices have declined since their $5.02 peak in June. Mendocino, California, clocked one of the highest rates in the country in June at $9.60, with a state average of $6.43.
Why it’s important
Gasoline prices rose after Russia invaded Ukraine in February. Russia produces 10% of the world’s oil supply. The war and embargos subsequently caused a gap in the supply chain.
Since then, demand has decreased and supply increased, lowering gas prices. The price fell because Americans drove less, remote worked more, and took fewer trips, according to The Wall Street Journal. “Over the four weeks [ending] July 8, implied motor-gasoline demand averaged 8.7 million barrels a day, down 8% from the same period last year, according to data from the U.S. Energy Information Administration.”
Additionally, the Biden Administration released hundreds of millions of barrels of oil from the U.S. Strategic Reserve to increase supply, which it says reduced “the price at the pump for Americans up to about 40 cents per gallon lower than it otherwise would have been.”
Backing up a bit
Gas prices are subject to constant fluctuations. In 2008, prices peaked at $4.11 per gallon in connection to the financial crisis. Prices dropped as low as $1.93 per gallon nationally during the COVID lockdowns in 2020. The national average one year ago in August 2021 was $3.25 per gallon. “Gasoline prices can change rapidly if something disrupts crude oil supplies, refinery operations, or gasoline pipeline deliveries,” says the U.S. Energy Information Administration.
Gasoline prices tend to peak in the summer months when families are traveling and lower in the fall. Gas price decreases could signal positive news for the unstable economy and help reduce inflation, with prices potentially decreasing further in the next few months. With the Ukraine War continuing and some U.S. oil refiners reportedly expecting to slow operations during the fall though according to The Wall Street Journal, it remains uncertain if decreases will continue.