$5 gas in rearview mirror, and bets are it won't be back in 2023

Gas is now cheaper than it was in January last year and far less than the record highs that topped $5 a gallon in mid-2022 and spurred county and state governments to enact fuel tax breaks.

On Thursday, the average price of regular gas on Long Island was $3.312 per gallon, which was about a third less than the record high of $5.04 on June 15, according to AAA. Thursday's price was 11 cents cheaper than the price a year earlier, $3.421.

At some local stations, prices under $3 were recorded in recent days, such as $2.84 at a Speedway in Levittown, $2.85 at a Costco in Holbrook and $2.83 at a Gulf in Farmingdale, according to GasBuddy, a Boston-based technology company that provides fuel price data.

Long Island residents welcomed the lower gas prices.

Deer Park resident Rich Walker is sensitive to fuel costs because he drives throughout the tristate area for his gigs as a comedian, he said Thursday in Farmingdale while fueling his Subaru Crosstrek at a Speedway station.

“I’m very conscientious of where I buy my gas and it has to be one of the lowest prices out there,” he said.

He appreciates the cheaper gas but the prices are still too high, Walker said.

Lower gas prices have helped Roosevelt resident Carlos Garcia, 52, with budgeting, he said.

“My pockets feel better. I feel like I’m saving more,” he said in Farmingdale while fueling his Subaru Forester at a BP station.

Severe winter storms across the country have sent prices up a few cents since last week but they are nowhere near the price surges seen across the United States in spring and summer.

Supply and demand issues and concerns about a recession are among the factors at play in forecasting where prices will go in the year ahead.

Nationally, gas prices will average an estimated $3.39 to $3.49 a gallon in 2023, said Denton Cinquegrana, chief oil analyst at Oil Price Information Service, based in Rockville, Maryland.

Long Island’s gas prices tend to be 20 cents to 25 cents more than the national average, but the spread is much narrower now — less than 3 cents.

Cinquegrana said the only caveat for his prediction would be the occurrence of a “black swan” event, such as a major crude-producing country going to war as Russia did last February by invading Ukraine. 

“Prices should stay in the current neighborhood for the next handful of weeks. Demand is soft in January and [the] market tends to get a bit oversupplied and sloppy,” Cinquegrana said.

Demand falls, recession concerns

One of the reasons gas prices have fallen is that consumer demand is low, even for winter — a season in which gas consumption is typically weak, fuel experts said. 

Demand for gas is 6.7% lower than it was last year, due in part to consumers’ income growth not keeping pace with the rate of inflation, said Chris Lafakis, director of energy and climate economics at Moody’s Analytics in West Chester, Pennsylvania.

“The possibility of recession is likely in Europe and becoming increasingly likely in the United States, as well,” he said.

Another factor in gas prices falling at the gas pumps is the falling price of crude oil. (Crude is refined to produce gasoline, diesel, jet fuel, heating oil and other petroleum products.)

Prices for benchmark crude rose to a 14-year high of $123.64 per barrel on March 8, partly as a result of the market’s uncertainty over the Feb. 24 invasion of Ukraine.

But, as of Wednesday, benchmark crude had dropped to $73.22 per barrel because of the global economic outlook, particularly in the United States and Europe, following the Federal Reserve’s and European Central Bank’s repeated interest rate hikes last year to curb high inflation, Lafakis said.

“Investors are looking at the economy and they are not sure that the economy is going to be able to avoid a recession with the … lagged impact with these interest rate increases,” he said.

Winter creep

While fuel prices have fallen considerably since their peak in June, they have crept up over the last week due to the late-December storm and extremely cold weather, with refineries in Texas and the Gulf Coast forced to shut down temporarily, AAA said in a statement Tuesday.

“The storm also caused holiday travelers to fuel up and hit the road early to beat the bad weather, leading to a spike in overall gas demand,” AAA said.

Also, in New York State, the partial fuel tax caps adopted to offset high gas prices — 16 cents at the state level and lesser amounts at the county levels — expired in December, for the most part.

But the effects are not showing up at gas pumps yet, said Robert Sinclair Jr., spokesman for AAA Northeast’s Garden City office.

"It could be that the market forces that had been sending prices lower has offset the increase” from the gas cap expirations, he said.

Nassau and Suffolk counties were among 25 counties that enacted partial fuel tax caps for gas above $3 a gallon, but their effect diminished toward the end of 2022 as prices fell back.

By Tory N. Parrish

tory.parrish@newsday.com@ToryParrish1

Tory N. Parrish covers retail and small business for Newsday. She has worked at the Pittsburgh Tribune-Review and Observer-Dispatch in Utica, N.Y.