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Crude oil prices have fallen due to recession fears, contributing to lower petrol prices

A gas pump at a gas station in Detroit, Michigan on August 11. Photo by Matthew Hatcher/SOPA Images/Lightrocket via Getty Images.

On several occasions, however, President Joe Biden and members of his administration have cited falling gasoline prices, suggesting that the decline is due to the president’s policies.

“Gas prices are going down,” Biden said August 5 remarks About the July jobs report from the Bureau of Labor Statistics, for example. “They’re down to about a dollar a gallon … from where they were just a month ago. And, you know, we’re making progress.

At the time of Biden’s remarks, average gasoline prices were about 61 cents lower than the same week a month earlier, according to weekly data from the U.S. Energy Information Administration. The average price for the week ended August 15 was about $3.94. That’s less than $1 from a peak of $5.01 in the second week of June, but more than 76 cents above the average price for the week ending Aug. 16, 2021.

But That is We have written before, the US president has little control over the price consumers pay for gasoline. That’s why Republicans were wrong to claim that Biden was responsible for the spike in gasoline prices earlier this year. Biden can’t take much credit for falling prices now.

“No administration really has enough control over gas prices.” Andrew GrossA spokesperson for AAA Automotive said in an interview with FactCheck.org.

In a tweet in early August, Patrick de Haanhead of petroleum analysis for fuel-price tracking service GasBuddy, He said on his Twitter Followers “descent #Gasprise Thanks to the free market that resulted in higher prices. In July, they He tweeted “No politician can take credit for this,” he said, referring to prices dropping below $4 a gallon at thousands of gas stations across the country.

Why are petrol prices so low?

Gasoline prices Mainly determined The price of crude oil, and from the price Crude oil Mainly set in global market based on supply and demand.

Prices to Crude oil And Gasoline Economic activity slowed along with economic activity in the early months of the Covid-19 pandemic, when mitigation efforts limited travel around the world. But as countries end their lockdowns and the global economy begins to recover, the Demand for oil increased faster than the available supply – leading to More oil and gasoline prices. Russia’s invasion of Ukraine in February resulted in the US and other nations imposing sanctions and Prohibits On Russian oil, it created more volatility in the market and drove prices even higher.

But oil prices have fallen significantly since reaching more than $120 per barrel in early June. As of August 15, West Texas Intermediate crude, the US oil benchmark, fell to $92.24 a barrel, according to EIA’s latest daily data. On the same day, Brent crude, the international standard, was at $98.25 per barrel — down from $129 roughly two months earlier.

The latest figures show that WTI and Brent crude oil were at $89 and $95 respectively as of August 16.

Those declines have contributed to lower gasoline prices.

“Oil makes up about 60% of what you pay at the pump,” AAA’s Gross told us. “If oil prices go down, that really takes the pressure off of people paying at the pump.”

Experts said the main reason for the drop in oil prices is that oil traders fear that major economies around the world may be headed for a recession that will reduce demand for oil. In the US, gross domestic product has declined for two consecutive fiscal quarters, for example.

“I submit that current prices are now headed for a shallow decline,” Tom Kloza, global head of Energy Analytics and co-founder of Oil Price Information Service, told us in an email.

The Federal Reserve Bank of New York publishes an almost weekly Oil Price Dynamics report that looks at fluctuations in prices based on supply and demand factors. The For the most part its Reports Since Oil prices fell in late June due to an increase in expected oil supply and a decrease in oil demand expectations.

In its short-term energy outlook published on August 9, the EIA said crude oil prices fell in July as “concerns of slower economic growth or recession became more prevalent”. Likewise, the International Energy Agency said in its oil market report for August that “rising concerns about rising oil supplies and a worsening economic outlook have pushed prices down nearly $30/bbl from their peak in June.”

World oil supplies hit a post-pandemic peak of 100.5 million barrels per day in July, the IEA said. Production rose by 530,000 barrels a day from OPEC+, an alliance between the 13-member Organization of the Petroleum Exporting Countries and a separate group of 10 non-OPEC members, including Russia. In Russia, production and exports were higher than previously forecast, the IEA said.

For non-OPEC+ nations, production increased by 870,000 barrels per day.

But those aren’t the only factors contributing to lower gasoline prices in the U.S., Gross said.

“Another point is [gasoline] Demand is down because people have really changed their driving habits to cope with these high gas prices,” he told us.

A AAA survey A survey published on July 22 found that 64% of adults had changed their driving habits because of higher prices. Of those people, 88% reported driving less and 74% said they combined errands to shorten trips and save money.

EIA data also show that, as of August 12, the four-week average of finished gasoline supplied by US demand estimates was down more than 4% from the same week in August 2021.

“So you have less [gasoline] demand and [oil] Supply is a little less expensive, and you’re going to get these falling prices,” Gross said.

What effect has Biden had?

Despite those factors, Biden and the White House are promoting falling prices and suggesting their policies are responsible.

“I promised I would address Putin’s price hikes at the pump, and I have,” Biden’s presidential Twitter account said. He tweeted On August 11. “We used our strategic petroleum reserves to get relief to families quickly — and we rallied our allies and partners around the world to do the same. Much work remains, but prices are falling.

To counter the decline in global supply of oil that has led to price rises, the White House announced In late March, Biden authorized the release of about 1 million barrels of crude per day by the Federal Reserve for six months. At the same time, other nations in the IEA agreed to collectively release 60 million barrels of their own oil reserves.

But experts we consulted said it’s unknown how much Biden’s strategy has helped gas prices.

Calculating the per-barrel impact of an oil release is a “completely subjective” exercise, Kloza told us. “I said the White House’s move to sell SPR crude in six months is a gambit — we’ll see if the market balances out when sales stop this fall,” he said.

Gross said the impact of the oil emergency is difficult to measure.

“There’s no denying that gas prices went down because they did that,” he said in an interview. “But there are other factors at play. But it certainly didn’t hurt, and it probably helped. But we have no way of knowing how much.”

in one Analysis Published on July 26, the Treasury Department estimated that SPR releases, combined with additional releases from other IEA countries, reduced gasoline prices in the US by between 17 cents and 42 cents a gallon.

Other administration efforts, such as the Environmental Protection Agency granting and extending an emergency waiver allowing gasoline with a 15% ethanol blend to be sold, as well as Biden proposing a temporary federal gas tax holiday, were not adopted by Congress. Had “little” influence.

“So in the end, a president usually has a muted effect on retail prices and that works either way up or down,” he said.

Where do prices go from here?

Kloza said it’s hard to predict for sure what will happen now that oil prices are seemingly “congested or converging” in the $90 to $102 per barrel range.

“Threading the needle for moderate oil prices is difficult because of a real gauntlet (Putin, hurricanes, worries about production from Venezuela, Nigeria, Iraq, Iran and Libya) to run through,” he said.

Hurricane or other Supply disruptions Oil and gasoline prices may rise in any major oil-producing country.

Plus, GasBuddy’s De Haan said in one August 15 analysis Increasing wholesale prices for gasoline, the price that retailers pay to refining companies, could mean that retail gasoline prices could soon rise.

“For the ninth straight week, gas prices continued to fall, but the streak could be broken this week with wholesale gasoline prices pulling back about 40 cents per gallon as oil prices rebounded,” he wrote.

“That means the drop in average prices could wrap up soon, with some price increases possible as early as this week, especially in the Great Lakes region,” he continued. “While the West Coast and some areas in the Rockies may see prices move lower, I believe the national average could rise this week as a better-than-expected jobs report last week dampened demand.”

The EIA projects that retail prices will average $4.29 a gallon in the third quarter of 2022 and drop to an average of $3.78 in the fourth quarter.


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