Gas Prices Have Dropped, But The Relief Might Not Stick

Experts say rebalancing supply with demand is the biggest factor helping prices, but other factors could affect the costs.
Posted at 8:43 PM, Aug 11, 2022

It's a welcome relief for American drivers.

"I'm not tickled pink, but I'm happier it's less than what it was," said Glen Smith, a private transportation driver.

Gas is averaging less than $4 a gallon for the first time in more than five months. 

"If gasoline prices come down, that can help offset some of the increases in the foodstuff prices," said Brian Marks, professor at the University of New Haven Pompea College of Business.

The decrease is part of a complicated picture of the national and global economy. 

As inflation data shows price increases stabilizing month-to-month but still sky-high year-over-year, Americans are looking for any way to save money.

But, understanding how much relief the dip really might give us Americans first involves knowing why it’s happening. 

Mark Hamrick is Bankrate's Washington bureau chief.

"Demand was much stronger," Hamrick said. "With gasoline prices going as high as they went, there was a reduction in demand for gasoline. So with the efforts to try to bring more supply to market, prices have obviously plummeted.”

The national average for a gallon of gas is now $3.99.

The highest average is in Hawaii, where isolation and different sources of oil keep prices high at $5.39.

The lowest price tag is in Texas, where lower gas taxes and access to oil are keeping prices at a cool $3.49.

Experts say rebalancing supply of oil with demand for it is the biggest factor helping prices.

Other more minor factors, like suspending gas taxes and releasing oil from strategic reserves, have helped, but minimally. And, the relief might not stick. 

"This level of gasoline supply and the ability to refine crude oil, make it into gasoline, various fuels, is very tight," Hamrick said. "What I mean by that is, essentially, you have refineries operating at the highest level of capacity, and here, we are now sort of moving into the heart of the tropical storm/hurricane season.”

A destructive storm is raising concern because it could disrupt oil production and knock supply and demand off balance once again.

The war in Ukraine also looms over global oil prices — and now potential conflict near Taiwan. 

"I worry about geopolitical risk of probably about as much as I worry about anything with respect to the outlook for the U.S. and global economies, because we've had a demonstrated time and time again just how interconnected we are," Hamrick said.

Still, the price drop helps at least a little in the short-term, especially for business owners like Smith who earns money as a chauffeur in Louisiana. 

"There for a while, every two days I put $50 of gas in my car, and I'm not working that much," Smith said. "It's $12 to run from the airport to drop off in the city, $12 a trip!" 

"It's no longer stealthy; we see it every day," Marks said. "We were seeing it when we were going to the pumps. Now we're seeing that decline when we go to the grocery store. Those are the things that hit us in our face."