The average national price of regular gas is less than $ 5, the number that has been closely watched for the first time in nine weeks AAA.
That’s a little consolation for California drivers who paid an average of $ 6.38 a gallon by Tuesday, but experts say the price may be slightly lower before the July 4 holiday.
Consumer gas prices have fallen slightly in California in recent days, with the state average dropping about 6 cents in the past week, a survey by AAA’s Gas Station Prices Survey.
Los Angeles County saw its biggest daily drop in average daily prices for a gallon of regular gasoline since April 13, with prices down 1.5 cents to $ 6.403 on Tuesday.
As in LA, Orange County’s average is down seven days in a row, down 1.4 cents to $ 6.334 a night.
The US Energy Information Administration reports that pump prices are falling partly due to a decrease in fuel demand, with most drivers changing daily routines and budgeting for recreational travel, said Doug Shupe, corporate communications manager for the Automobile Club of Southern California. .
More importantly, the wholesale price of oil has fallen about 40 cents nationally and 60 cents in California over the past week, said Mary Montgomery, spokeswoman for the Southern California Automobile Club.
The decline was partly due to the Federal Reserve’s move last week to raise interest rates, Montgomery said.
“There is no kind of negative reaction with commodities when interest rates are raised,” Montgomery said. “So that’s really a trigger for why we’re seeing gas prices go down.”
Montgomery said that at some California gas stations, prices are below $ 6 a gallon. If higher fuel costs continue to create “demand destruction”, they may fall further, as consumers choose to travel less, rather than face higher prices at the pump.
But don’t expect prices to drop rapidly nationwide or in California.
Despite the slight decrease in gasoline demand across the country, Shupe said the need to consume gasoline is likely to increase as we go deeper into the summer travel period.
“It’s unlikely that we’re going to see any severe drops at any time,” Shupe said. “The reason is that we still have two big pressures that are putting upward pressure on the prices of the pump” – supply and demand.
Supply-side pressure due to the Russian war on Ukraine comes primarily from global oil concerns. Demand pressure comes from everything everyone still has to do for work and travel.
“We are in that period of the year. We have many people taking recreational leisure trips by automobile,” Shupe said.
Demand may increase as the July 4 holiday approaches – similar to the increase seen on Memorial Day weekend – and prices may also rise.
“We have seen a planned increase in operation for Memorial Day travel,” Montgomery said. “Locally, our travel agents are busy booking tours. People are really excited to get there because there are more restrictions. ”
One of the reasons for California’s high fuel prices is that state environmental laws require processors to follow specific gasoline formulas designed to reduce air pollution when temperatures are high.
With some suppliers producing the state’s distinctive gasoline blend, the California market is less competitive and less able to import fuel from other markets.
Then comes the taxes. According to the Office of Legislative Analysts, the tax levied on gasoline suppliers is shipped to California drivers at high prices before being delivered to retail outlets.
California drivers have to pay federal excise tax on gasoline, as well as being charged to suppliers and transferred to consumers, which is 18.4 cents per gallon. US Energy Information Administration.
Beyond taxes, the American Petroleum Institute, a trade association of the US oil industry, estimates that the country’s demand for petroleum has reached its peak, reminiscent of the 1960s.
Crude oil is the most significant component of the cost of gasoline, representing 60% of the cost of each gallon, EIA estimated.
Russia’s invasion of Ukraine has had a ripple effect on the global market, as Russia is the second largest contributor of crude and refined oil globally. In the aftermath of the crisis, prices have risen, reaching $ 122 a barrel, and have increased from $ 25 to $ 90 a barrel.