Crude oil prices fell on August 4 to their lowest prices since before Ukraine was invaded by Russia, as the futures market indicated a possible recession which may reduce consumer demand.
U.S. crude benchmark WTI fell below $90 a barrel for the first time since the invasion began in February to $88, while Brent crude fell to $95 a barrel as RBOB, the gasoline futures market, fell to $0.05.
The outlook for crude oil prices is difficult to predict, although the spread between WTI and Brent could widen further until some resolution to the Russia-Ukraine conflict is reached, said Bernard Weinstein, a retired professor of economics at Southern Methodist University in Dallas. The street.
Retail gasoline continues to fall
Gas station prices hit their 49th day of declines with average gas prices hitting $4.11 a gallon and now down 92 cents from mid-June.
Users get a much needed reprieve as inflation exponentially raised the cost of household goods such as energy, housing and food.
The national average is expected to drop to $3.99 a gallon in “less than a week” as 20 states and 85,000 stations have already reached that level, said Patrick DeHaan, head of oil analysis, GasBuddy. a Boston-based provider of retail fuel information and pricing data.
Two more states, North Dakota and Delaware, could also drop gas prices below $4.
There’s even a chance gas station prices could drop to $2.99 as early as next week, DeHaan said.
The states that will benefit will be in one of these 10 states: Texas, South Carolina, Oklahoma, Georgia, Arkansas, Tennessee, Mississippi, Alabama, Louisiana or Kentucky.
While that’s a potential scenario, drivers should temper their enthusiasm for now, he said.
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“Yes, it’s possible, but don’t jump for joy because it probably won’t be near you,” he tweeted. “If oil markets hold these lower levels, we could see several stations, perhaps in Texas, South Carolina or low-tax states, drop below $3/gal in the coming days.”
The smallest declines so far have been in the northeastern states because of “tight inventories and low gasoline imports” and because that region “relies on supplies from outside the region to meet demand,” he said.
Why Gasoline Prices Could Fall Further
Crude oil prices likely won’t post big gains because of the shrinking economy, Weinstein said.
“In the United States, the economic slowdown combined with reduced demand after the summer holiday season should keep crude oil prices in check,” he said. “The current economic downturn in China, which used to be the world’s largest importer of crude oil, will also reduce demand for crude oil.”
Retail gasoline prices may continue to fall this fall, but are unlikely to fall below $3.25 a gallon as long as global oil supplies remain tight, Weinstein said.
“U.S. oil exports, especially to Europe, can be expected to increase for the foreseeable future as Europe tries to wean itself off Russian oil,” he said.
Reaching the peak of hurricane season
Any hurricanes that make it to the Gulf of Mexico could derail the decline in gasoline prices as inventories “remain low,” Rob Tummel, senior portfolio manager at Tortoise in Overland Park, told The Street.
“An unexpected disruption like a hurricane affecting the Gulf Coast could push gasoline prices back into the mid-$4s,” he said.
Global refinery capacity is expanding again by roughly 1 million barrels per day by 2023, after shrinking by more than 3 million barrels per day from 2020 to 2022, Tumel said. “Increased global refinery capacity will provide relief to consumers keeping gasoline prices at $3 for the next few years.”
Colorado State University assessed the active Atlantic hurricane season and predicted 18 named storms (including three that have already formed), eight hurricanes and four major (Cat 3+) hurricanes.