As oil demand weakens, gas prices fall, with the national average falling below $4 a gallon earlier this month for the first time since March.
But the pullback could be short-lived, one expert warned, and prices could rise again before the end of the year.
“We are in a long-term structural bull market for oil,” Schork Group director Stephen Schork told Yahoo Finance Live (video above). “By the end of the year, I suspect those prices will be back in that $100 to $125 range that we saw in the first half of this year.”
Schork explained that the surge in prices in the final months of the year will be driven in part by the European Union’s looming embargo on Russian oil, which is due to take effect in December.
Russian oil production is expected to fall by about a fifth next year due to the EU ban, according to International Energy Agency (IEA). The agency estimated that 1.3 million barrels per day of crude oil and 1 million barrels of Russian petroleum products “will have to find new homes.”
Short term relief
Despite the call for higher prices early next year, Americans may see more relief in the near term.
Crude oil futures were lower on Tuesday, as West Texas Intermediate (CL=F) for September delivery fell 2.9% to $86.32 a barrel as of 1:37 p.m. ET, while Brent futures (BZ=F) traded at $92.31 per barrel.
Schork suggested that recession fears have caused oil demand to pull back, and that those lingering concerns could lead to lower crude oil and gasoline prices in the early fall.
“I really think we’re in a recession right now, and that’s why we’re seeing a huge drop in demand for gasoline in the United States,” Schork said, adding, “Going into the previous months, September and October, you’re going to continue to see demand go down.”
The national average price of gasoline in the U.S. has fallen more than 20% from a record high in June, reaching $3.95 a gallon on Tuesday. according to AAA.
“We see oil prices as potentially low to the $70 range, depending on whether we continue to see this massive demand destruction that we’re seeing,” Schork said. “I think $3.50 is extremely doable between now and early fall.”
Shawna Smith is a Yahoo Finance anchor. Follow her on Twitter at @SeanaNSmith.