Key Takeaways:
- Average gas prices are falling in recent week
- Amid growing inflation, the gas price plunge comes as a relief to many households
- Global demand for gas has fallen in recent weeks
YEREVAN (CoinChapter.com) — In what comes as a huge relief for low and middle-income households, gas prices are falling.
According to recent data, the national average price in the United States fell below $3.40 from its yearly high of $5.02 in June 2022. Meanwhile, a month ago, the national average was $3.80, according to the American Automobile Association (AAA).
In some US States, such as Missouri, Kansas, Mississippi, Texas, Oklahoma, Arkansas, Louisiana, Alabama, Tennessee, and Georgia, average gas prices plunged to as low as $2.99, according to GasBuddy.
GasBuddy is a Boston-based tech company that allows users to get real-time fuel prices at more than 140,000 gas stations across the United States and Canada.
In other states, such as Pennsylvania, prices remain comparatively higher. This is because of the state’s gas tax of 57.6 cents a gallon. As per the AAA data, the average gas price in Pennsylvania is $3.86.
If this tendency continues, experts believe the national average could drop to $3 by Christmas.
“For the first time in 670 days, the national average price of gasoline has fallen below its year-ago level, dropping for the fourth straight week to its lowest level since January…. It remains very possible the national average could fall under $3 per gallon by Christmas,”
Patrick De Haan, head of petroleum analysis at GasBuddy claimed.
Gas Prices in California Get National Attention
Gas prices in California are notoriously high. For example, in October 2022, the average price of a gallon of gasoline in the state was more than $2.60 above the national average. This is the biggest gap for a state that usually has higher prices.
As a result, California’s Democratic Party Governor Gavin Newsom has faced backlash from Republicans and common citizens. So to make amends, he is now going after large oil companies that have made a killing by overcharging consumers.
On Monday, lawmakers returned to the legislative assembly to proceed with a special session following a request from Governor Newsom. They were called to deliver on a law tabled by Senator Nancy Skinner (D-Berkeley).
The bill gouges penalties on oil companies’ excessive profits to deter unrestrained price increases.
“California’s price gouging penalty is simple – either Big Oil reins in the profits and prices or they’ll pay a penalty. Big Oil has been lying and gouging Californians to line their own pockets long enough. I look forward to the work ahead with our partners in the Legislature to get this done,”
Governor Newsom said.
The move will make California the first state to penalize big oil companies for making too much money.
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Controlling California’s Gas prices in 2022 Comes at a Cost
Governor Newsom faces stiff resentment from the oil companies for his initiative. They collectively make one of the strongest lobby groups in the state. Going against them can come at a high personal and political cost for him.
The stakes are also very high for lawmakers. On the one hand, they would need to go against these rich companies, while on the other, they would be answerable to the public.
California residents could refuse to vote for any lawmaker in the future who votes against the resolution.
Big Oil has earned record profits from high gas prices and will go to any length to protect its interests.
According to a recent poll from Consumer Watchdog, 60% of California voters support a price-gouging penalty.
Meanwhile, Oklahoma’s Republican Governor, Kevin Stitt, has not missed the opportunity to attack Newsom. He claimed that the price hike was his California counterpart’s fault and that oil companies should not be penalized. Moreover, he invited these companies to shift to his state instead.
Why Are Gas Prices Falling Now?
Sudden fuel shortages and increased demand caused gas prices to shoot up in the United States and Europe.
Gasoline and diesel fuels are made using Crude Oil. However, after the pandemic broker, oil companies cut down on their production as the constant lockdowns had created a surplus. This caused the global supply to drop.
Russia’s aggression in Ukraine also played a huge role as the United States banned oil imports from the country. This further squeezed global supply as the Kremlin produces 10% of the world’s Oil.
As CoinChapter earlier reported, the Organization of the Petroleum Exporting Countries (OPEC) and other oil exporters reduced oil production by one million barrels daily.
This drop in supply resulted in increased demand, thus impacting the prices. The Biden Administration even resorted to releasing oil barrels from the country’s strategic reserves to curb shortages.
However, as winter approached, demand for fuel also dropped. As a result, fewer people now drive their vehicles on vacations. Moreover, fewer people can afford to fill their tanks and heat their homes.
The growing inflation and the uncertainty of global supplies owing to a possible lockdown in China have also impacted demand. This is one of the major reasons why oil prices are falling.
“With COVID cases soaring to record highs in China and the threat of widespread lockdowns there increasing, the key question is how much demand could fall, freeing up supply for the rest of the world?,”
the Washington Post quoted Edward Gardner, a commodities economist at Capital Economics.
The fall in the price of crude Oil has also benefited gas prices. Brent crude futures fell $3.33, or 4%, to settle at $79.35 a barrel on Dec 7.
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Gas Demand Falls in Europe
One of the main reasons for the recent plunge in gas prices is Europe’s actions against As CoinChapter earlier reported, the European Union is mulling on placing a price cap on Russian Oil.
Gas demand in Europe has dropped significantly. According to a recent Financial Times article, gas demand in Germany and Italy fell 23% and 21%, respectively. These two are the gas consumers in the EU.
Other countries in the block have also witnessed a drop in demand.
The situation in the United Kingdom is no better. Gas prices have gone up again in recent days. Several protests have broken out across the country, asking the government to intervene ahead of a cold winter. According to a recent survey, as many as 45 million people in the country face fuel poverty.
As a result of the growing energy crisis, the UK will work with the US to increase energy security and control the growing prices.
The office of the country’s Prime Minister Rishi Sunak announced the partnership.
“Together the UK and US will ensure the global price of energy and the security of our national supply can never again be manipulated by the whims of a failing regime…This partnership will bring down prices for British consumers and help end Europe’s dependence on Russian energy once and for all,”
the announcement reads.
Meanwhile, Northern Ireland gas supplier Firmus Energy has announced it will reduce gas prices in the country. As a result, the Belfast area will see tariffs drop by 17.6%. Moreover, tariffs will also drop about 20.52% in the Ten Towns Network.
The cut will come into effect on Jan 1, 2023. The company believes it will cut household bills by an average of more than £400 ($485) a year.
