When will gas prices go down in the US: understand the factors involved

Do you miss when gas costs US$ 3.00? So do we! Understand what is happening with the price of gasoline and what we can expect for the future.


Gas prices are on the rise: here’s what you need to know

Hand holding hose for fueling car
What will you see on the gas station price panel next month? Read and find out. Source: Pixabay

In fact, if you’ve been gassing up your vehicle in the last few weeks, you must be used to high gas prices. Thus, today the average price of gasoline at the main stations is US$ 4.970. This figure can be considered high when compared to last year’s average price: US$ 3.067 (source: AAA Gas Price, June 9, 2022). So the question arises, “when will gas prices go down?”

According to experts, the increase in prices has not yet been enough to give up the use of cars. So far, demand has held up nationally. Thus, there is still movement at the stations and customers can fill their tanks. However, what really worries is the supply of this “black liquid”.

In addition, some experts say that we have not yet reached the peak and guarantee that the price can go up even further. According to the JPMorgan report, the value of this input could reach US$ 6.20 by August.

In this scenario, people who depend on this good expect prices to return to pre-pandemic values ​​while the White House looks for solutions. Therefore, understand the forces behind the rise in gasoline prices and who are the main actors in this scenario.

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What factors can affect the gas price? Why is it so high?

Electronic gas station price dashboard showing low prices
Will we see scenes like this again in the coming months? Source: Pixabay

In fact, gasoline and most fuels used today are refined products of petroleum. Thus, the more expensive a barrel of oil is, the more expensive the production of gasoline will be. In a “domino effect”, this increase ends up reaching customers who consume the product at gas stations.

So instead of asking “when will gas prices fall”, ask “when will the oil price fall?”. On June 9, 2022, the average price of a barrel of oil was US$ 122. This is much higher than the numbers from the beginning of 2020, when the good could be bought for approximately US$ 20.

As a commodity in common use, the price of oil is defined in terms of global demand and supply. In fact, the main reasons for this rise were the Russian-Ukrainian conflict and the “social sequel of covid-19”. Russia is responsible for 12.1% of all the world’s oil.

When such an important country comes into conflict, there are doubts about the continuity of production of this good in that country. Thus, the market responds by pushing prices up. Furthermore, Troy Vincent, a senior market analyst at energy analysis firm DTN, points to another factor.

Oil factories have greatly reduced their production during the pandemic. In fact, these companies did not expect such a quick economic return and are still hesitant to increase production volume. Thus, the supply of goods in the market decreases, which also raises the price.

Will prices get even higher?

So what do you say to those who ask, “when are gas prices going to drop?” According to Troy Vincent (DNT), when the price of oil rises, the price of gasoline responds to that rise immediately. However, the opposite effect does not happen. So even if the price of oil were to fall today, the rise in gasoline would last a little longer.

Thus, we must prepare for the maintenance of high prices.

Will gas prices go down in the following months?

Suction rod pump
Understand how the supply of gasoline influences the prices in the United States in the coming months. Source: Pixabay

However, have we already reached the “top of the price mountain” for this fuel? Richard Joswick, head of global oil analysis at S&P Global Commodities Insights, says yes. According to him, the offer will reach adequate levels in the coming months.

Thus, it is possible to count on a fall in value in June or July of this year. Well, if that happens, our pockets and wallets will thank you very much!

What can decrease gas prices?

In recent weeks, the White House has struggled to contain rising gasoline prices. In late March, Biden announced that he would release 1 million barrels of oil a day from the US Strategic Petroleum Reserve to the market. This stimulus will take place over the next six months and could help control the company.

Another action to establish the offer is the price that the president makes in the oil companies. In some speeches, the president has criticized companies that are “sitting” on resources without working on them.

In addition, the country is already negotiating with Iran and Venezuela on the receipt of imported oil, as it has suspended the entry of Russian oil on national soil. There is also a bill that aims to temporarily suspend fuel taxes. As of May 25, Connecticut, Maryland, New York and Georgia have passed laws similar to this one.

All these measures can contribute to reducing the price of gasoline. In addition, if the Russian-Ukrainian conflict ended in the next few months, barrel prices would fall sharply. The same goes for overcoming the “sequences” left by the pandemic.

Now that you know when gas prices will fall, understand why this conflict interferes so much in the international scenario. Click on the link below and read an exclusive article.

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About the author

José Gonçalo

I started reading about finance only to find better options than savings. Since then, I have never stopped studying finance, and I believe that writing about it is the best way to help individuals feel fulfilled and have a healthy financial life. Today, I balance finance and medical school studies.

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