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Gas prices are up $4 but hurricane season pricing is the wild card

  • US average gas prices are approaching $4.00 a gallon, extending recent price declines.
  • Gas prices have fallen for more than 50 days in the face of demand destruction after prices rose above $5 this year.
  • But a disruptive storm could push prices back up, AAA and OPIS said.

Drivers across America could soon be paying an average of less than $4 a gallon for gasoline, with prices falling steadily over the past month, but energy experts say an active storm has the potential to push prices back up.

The national average price of regular grade gas was $4.113 as of Friday, according to Motor Club AAA tracking. The price marked its 52nd consecutive decline amid a painful few months at the pump stations for millions of Americans. Down from a peak of $5.01, the national average was $4.80 a month ago but up from $3.19 a year ago.

“A back-of-the-envelope calculation suggests that by the middle of this month, consumer daily spending will be half a billion dollars a day lower than it was in the first 10 days. In June,” Tom Kloza, global head of energy analysis at OPIS, told Insider this week. he said separately on Friday The country was “a few hours” away from the average price slipping below $4.10 a gallon, and the average price was $3.939.

He said the market saw significant demand destruction when gas prices hit $5 a gallon, and that led to a steady decline in pump prices. The downshift is underway as the summer driving season draws to a close as Americans wrap up their road trips. Traditionally marked by the Labor Day holiday, the summer driving season ends on September 5.

Still running on the calendar is hurricane season. Peak months are August to October, with the season ending on November 30.

Above the normal hurricane season

“Atmospheric and oceanic conditions still support an Atlantic hurricane season beyond 2022,” the National Oceanic and Atmospheric Administration said this week in updating its 2022 outlook. It now sees a 60% chance of a normal season, down from its previous call for a 65% chance.

“A lot of production will come offline because of a bad hurricane season domestically,” Skylar McKinley

, regional director of public affairs at AAA Colorado, told Insider. “Even what we import comes through the Gulf refineries, which is not the only one [what’s] produced at home,” and a disruptive storm “could really send prices back up.”

NOAA’s outlook, which covers the six-month period of the season beginning in June, calls for 14 to 20 named storms marked by winds of at least 39 miles per hour. Six to 10 storms could become hurricanes, with sustained winds of at least 74 miles per hour. Three to five of those storms could become major hurricanes with sustained winds of 111 mph or higher, the agency said.

“I can assure you it will be less [gas] “Prices after Labor Day … if a bad storm doesn’t knock out refining capacity,” McKinley said.

“Historically, in general, those costs have been regionalized. So it’s not true that people in Colorado pay more because of bad storms. But people in the Gulf region certainly do, and depending on how bad it is, it can affect the entire country.”

Kloza said the market has enjoyed a “lucky streak” so far this year with no major hurricanes or refinery disruptions. “If we don’t get a tropical storm threat in the Gulf of Mexico, we’ll see retail prices drop below $4 a gallon, probably by August 15 or 16,” he said. Gas prices will rebound quickly in the event of storm disruption but probably not above $5.0150, he said.

Also, Kloza said, Russian President Vladimir Putin may try to inflict more pain on the West by curbing crude oil, which would send gas prices back up. Brent crude, the international benchmark, traded around $95 a barrel on Friday, and US benchmark West Texas Intermediate crude oil settled at around $88.80 a barrel. The benchmarks lost ground during the week but are up roughly 18% and 22% year-to-date, respectively.

Gas prices began to rise after Putin launched a war against Ukraine in late February. The average US price on March 1 was $3.60, McKinley said. Gas prices will eventually return to pre-war levels, he said.

“Will that happen in the near term? Look, if it does, it’s bad news. If prices fall to $2.50 or $3 quickly … that’s a sure sign that we have some significant economic problems. Either that is being felt or it’s on the horizon,” McKinley said.

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