Gas prices fall with consumer demand amid recession fears
Consumers cut back on driving as gas prices hit $5, and the drop in demand helped to push prices down. Credit: Raychel Brightman
Summer is typically peak driving season, but consumers worried about the economy are spending less time behind the wheel and helping to drive gas prices down.
After hitting record highs that passed the $5 mark for the first time in June, average gasoline prices have been falling for five weeks as consumer demand and crude oil prices decline amid recession fears, fuel experts said.
“That $5 handle that we saw, that really inspired people to cut back,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service in Rockville, Maryland.
On Long Island, the average per-gallon price of regular gas fell for 36 consecutive days, between June 15 and Thursday, according to the Oil Price Information Service. The price Thursday was $4.472 per gallon, still 39.8% higher than the price a year earlier, $3.198.
The average price of a gallon of regular gas on Long Island surpassed $5 for the first time June 8, according to AAA. The current Long Island record was set June 15, when the average price was $5.046.
By June, gas prices nationwide had been rising for more than a year as consumers’ demand for fuel had been increasing as they returned to driving for work and leisure after the COVID-19 pandemic, but crude oil output had not returned to the levels that existed before the pandemic hit the United States in early 2020.
The oil price woes were exacerbated after some countries and refineries stopped buying oil from Russia because of its Feb. 24 invasion of Ukraine.
Gas prices have been falling since mid-June, though they’re still elevated.
Factors pushing prices down
A combination of factors is at play in the price drops, including declining crude oil prices, fuel experts said.
The price of crude accounts for about two-thirds of the cost of gas at the pump, said Chris Lafakis, director of energy and climate economics at Moody’s Analytics in West Chester, Pennsylvania.
The price of benchmark U.S. crude oil settled Thursday at $104.15. On June 8, it was $123.94, which was the highest price of the year.
Worries about the possibility of a recession amid inflation at a 40-year high are impacting crude prices, fuel experts said.
“The economy is stronger than [consumer] sentiment is, but recession fears have definitely increased over the past month and that has helped to bring down oil prices,” Lafakis said.
Another factor in the declining price of gas is the falling demand for the fuel. Consumer demand for gas is 7.6% lower than it was a year ago, Lafakis said.
How low will they go?
Experts’ predictions about how much more gas prices will continue to fall vary.
Kloza expects average per-gallon prices to fall another 10 cents to 15 cents by the end of July, in regions east of the Rocky Mountains.
Other fuel experts predict more of a decline.
Gas price averages could fall 25 cents to 40 cents over the next three weeks, said Patrick De Haan, head of petroleum analysis at GasBuddy, a Boston-based technology company that provides fuel price data.
But there are caveats that could send prices back up.
Intense summer heat can lead crude oil refineries to break down, disrupt oil flow and send prices up, as can hurricanes, Kloza said.
Hurricane season in the Atlantic basin, including the Gulf of Mexico, runs from June 1 to Nov. 30 but most activity occurs from mid-August to mid-October.
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.
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