Energy costs feed into broad measures of inflation, so the drop is also good news for policymakers who have struggled to contain rising prices. It is a welcome development for Biden, who has spent recent weeks trumpeting the drop in gasoline prices, even as he pledges to do more to bring costs down. Biden has criticized oil companies for their record profits, and this year he released some of the nation’s stockpile of oil in an effort to reduce price pressures.
“I’m going to keep doing what I can to bring down the price of gas at the pump,” he said at a briefing last month.
For consumers, falling gas prices offer a respite from a shaky economy, rapid inflation, and other worries.
“We have new rising diseases and inflation, and people expect a recession,” said Zindy Contreras, a student and part-time waitress in Los Angeles. “If I just had to not worry about my gas tank taking up $70, that’d be a huge relief, for once.”
Contreras has been filling up her 2008 Mazda 3 only halfway as a result of the higher prices, costing her $25 to $30 each visit to the pump, and she had found opportunities to carpool with friends. These days, Contreras usually gets gas twice a week, driving 15 miles to and from work each week and an additional 10 to 50 miles a week, depending on her plans.
The national average price masks wide regional variations. Prices vary according to the health of local economies, proximity to refineries and state taxes, said Devin Gladden, a spokesman with AAA.
In California, for example, regulations to limit pollution make driving more expensive, with the average price of gas now $5.38 a gallon, with some counties recording averages of well over $6. In Georgia, which has lower gas taxes and is close to refineries, the statewide average price for a gallon of gas is about $3.55.
But broadly speaking, the general drop in gas prices reflects a number of factors: weaker demand, because high costs have kept some drivers off the roads; a sharp decline in global oil prices in recent months; and the fact that a handful of states have suspended taxes on gasoline. On Thursday, the group of oil-producing countries known as OPEC revised down its forecast for oil demand this year.
Regardless of the causes, the lower prices are a welcome change for drivers for whom the added expense — often $10 to $15 extra for a tank of gas — had become yet another hurdle as they sought to get their lives back to normal as the coronavirus pandemic eases.
“The affordability squeeze is becoming very real when you see these high prices at the gas pump,” said Beth Ann Bovino, the US chief economist at S&P Global. “So, in that sense, it’s a positive sign certainly for those folks that are struggling.”
That cushion — cash not spent on gasoline that can go elsewhere — also extends to businesses, particularly as the price of diesel fuel drops. Diesel, which is used to fuel, for instance, farm equipment, construction machinery and long-haul trucks, has also fallen from a June record, though at a slower pace than gasoline prices.
The drop in the price of gas is also good news for the economy, as businesses face less pressure to pass energy costs on to their customers — a move that would add to the country’s inflation problem.
The government reported this week that consumer price inflation slowed in July to a still-high annual rate of 8.5 percent, down from 9.1 percent in June, thanks largely to the drop in gasoline prices. If it persists, the slowdown in inflation could allow the Federal Reserve to ease up on its campaign to raise interest rates.
Oil prices have tumbled to their lowest point since the war in Ukraine began in February, a drop that reflects the growing concern of a global recession that will hit demand for crude. There are several reasons that prices could rise again: The course of the war could further hamper global oil supplies, energy investors’ views on the economy could change or hurricanes later this year could damage Gulf Coast refineries and pipelines, choking off supplies.
For now, though, the steady drop offers a reprieve to Americans who are concerned about their finances as the economy slows.
“If gasoline prices stay at or near the levels they have reached, that would mean much more cushion for households,” Bovino said.