The White House has been taking credit for falling gas prices — but experts say the true reason for the drop is that Americans are cutting back on driving and postponing vacations on account of record levels of inflation.
Gas prices have dropped to a nationwide average of $3.94 per gallon of normal unleaded fuel, which is considerably higher than the $3.18 that it cost a 12 months ago at the moment. Just two months ago, the national average surpassed $5 per gallon, an all-time high.
Before the recent dip, the Russian invasion of Ukraine exacerbated rising gas prices that were attributable to snarls in the provision chain.
The value of a gallon of normal unleaded fuel fell nationwide to below $4 for the primary time in months.Getty Images
President Biden claims that his decision to release 180 million barrels of oil from the Strategic Petroleum Reserve is the explanation for the recent drop.
“I promised I’d address [Russian President Vladimir] Putin’s price hike on the pump, and I’m,” the president tweeted on Aug. 11. “We’ve used our strategic petroleum reserve to get relief to families fast — and we rallied our allies and partners around the globe to do the identical. More work stays, but prices are dropping.”
The value of US crude fell to a six-month low of $86.53 a barrel on Tuesday — which is almost $4 cheaper than every week ago, though greater than $19 higher in comparison with a 12 months ago at the moment. On Wednesday, US crude rose 1.6% to $87.92 per barrel.
But Biden’s own Treasury Department acknowledged last month that the impact of the discharge was mild and that it lowered the value of gasoline between 17 cents and 42 cents per gallon.
Experts told The Post that the administration is unjustifiably tooting its own horn.
“Gas prices have fallen for multiple reasons, but Americans cutting back on consumption is the foremost factor,” Anthony Schiavo, an analyst at Boston-based Lux Research, told The Post.
Schiavo cited government data which showed that demand for gas dropped to eight.857 million barrels per day throughout the four-week period that spanned July. That number is far lower than last 12 months’s variety of 9.456 million barrels per day throughout the same time period.
Sky-high gas prices and record levels of inflation have spurred Americans to vary their driving habits, in response to AAA.
A recent survey by AAA found that some two-third of adults (64%) have modified their driving habits since March and that 23% of those polled said they made “major changes” to address the surging gas prices.
Americans have been cutting back on driving and postponing vacations in response to higher than usual gas prices, surveys show.Getty Images
Experts agree that a drop in demand is the important thing factor that has driven down gas prices.
“Economists typically attribute a drop in each the value and quantity in a market to be related to falling demand,” Tomas J. Philipson, a University of Chicago economist who served as former chairman of White House Council of Economic Advisors under President Trump, told The Post.
“Thus, as each gasoline prices and travelling have been dropping, demand should have retracted. If increased supply was the driving reason behind price declines, then traveling would increase on account of the value drop.”
Last month’s figure can be concerning the same because the variety of barrels consumed by Americans in July 2020 — which was the peak of pandemic-related lockdowns.
Experts told The Post that falling demand in gasoline has led to lower prices on the pump.Getty Images
“Continued SPR releases have relatively minimal impact and ultimately create greater problems down the road for refilling the reserve, potentially at higher per barrel costs than today,” Benjamin Dierker, the director of public policy at Alliance for Innovation and Infrastructure, told The Post.
Experts also cite other aspects, including the reduce speculative activities within the oil markets in addition to continued COVID-related lockdowns in China, which has also dampened demand.
“Gas prices have fallen because speculators have left the market,” Josh Answers, the host of the web show The Trading Fraternity, told The Post.
“An enormous a part of the recent oil run that has been ignored is the number of individuals trading futures, which in turn helps keep prices going up.”
Based on Answers, futures contracts on oil have dropped over 30% since last month.
“The opposite factor is China,” he said.
“Over the past three months, all of the lockdown news out of China made many individuals reconsider China’s oil demand and this helped bring the demand down considerably.”