Gas prices could drop soon, experts say. When will California see lower costs?
Gasoline prices should drop. Maybe soon.
“We could drop 10 to 25 cents a gallon over the next couple weeks if nothing changes,” said Patrick De Haan, head of petroleum analysis at GasBuddy.
Sanjay Varshney wouldn’t get that precise but agreed prices should drop.
“It’s going to happen. It’s just a matter of time,” said the professor of finance at California State University, Sacramento.
Mark Schniepp, principal at the California Economic Forecast, was not so optimistic.
”We rarely see price declines because of travel demand and a more expensive gasoline blend required in California and the U.S. for the summer months,” he said.
The easy explanations for a potential price drop are some age-old laws of economics: Supply and demand. Higher prices at the pump should dampen demand, so gasoline prices fall to attract more customers.
One factor that’s questionable to contribute to any price drop: The plan offered Wednesday by President Joe Biden to suspend the 18.4 cents a gallon federal gas tax for three months is getting mixed reviews at the Capitol, where Congress’ approval is needed.
Why prices could drop
There’s already been a slight decline. Wednesday’s average price for a gallon of regular gasoline in California was $6.37, the highest in the nation. That’s down a penny from Tuesday and six cents from a week ago, though still well above the year-ago average of $4.24.
The official word on what’s could be ahead from federal Energy Information Agency Administrator Joe DeCarolis: “Although we expect the current upward pressure on energy prices to lessen, high energy prices will likely remain prevalent in the United States this year and next.”
Two forces can work to stabilize the lower prices — oil producers could pump more product as they see the price go up, and drivers could consume less because of those higher prices.
“We’ve gone through this cycle before,” Varshney said.
OPEC, the group of oil-producing nations, announced recently it expects to increase production slightly in July and August.
Crude oil prices averaged about $113 a barrel last month, and EIA estimates that the average will drop to $108 a barrel in the second half of this year.
One big variable: The west’s sanctions on Russia, which can no longer import oil to the United States or Europe. Russia accounted for about 2% of the United States’ oil, but Europe’s percentage was much higher.
The price of oil also could be affected by the future of the U.S. economy. The Federal Reserve Board last week raised key interest rates in an effort to slow demand, and is expected to announce more increases next month.
As demand drops, so usually do prices.
“There might be some reprieve in oil prices when summer ends and demand slackens. Or if the world economy continues to slow and many countries fall into stagnant or no growth,” said Schniepp.
But don’t get giddy, he warned. “These are the reasons you might see some volatility in oil prices and therefore gasoline prices over the next six months to a year. But don’t expect a return to 2019 or 2020 gasoline prices, or anything close to that,” Schniepp said.
What doesn’t work
Experts are skeptical that government driven efforts will do much to get prices down.
Biden Wednesday announced a push to suspend the 18.4 cent a gallon federal gas tax for three months.
While some lawmakers, notably Rep. Josh Harder, D-Turlock, have pushed such a plan for some time, many congressional leaders were reluctant Wednesday to embrace the idea.
House Speaker Nancy Pelosi, D-San Francisco, said “We will see where the consensus lies” on strategies for reducing oil prices.
Sen. Tom Carper, D-Delaware, was unenthusiastic.
“Suspending the primary way that we pay for infrastructure projects on our roads is a shortsighted and inefficient way to provide relief,” tweeted the chairman of the Senate Environment and Public Works Committee.
Minority Leader Mitch McConnell, R-Ky., said the proposal was little more than a gimmick “so that everyone in Washington can pat themselves on the back and say they did something.”
Biden also urged states to cut gas taxes or find other relief. California’s tax is 51 cents per gallon and goes up 3 cents next month.
The gas tax holiday was tried this spring in Maryland, which suspended its 36 cents per gallon tax for a month. While prices averaged $4.05 a gallon in March, and then dropped in April during the suspension, they averaged $4.54 in May.
This story was originally published June 23, 2022 at 5:00 AM with the headline "Gas prices could drop soon, experts say. When will California see lower costs?."
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