6 October (Reuters) – Gasoline prices in the United States are falling and may reach $3 per gallon in many areas in the coming weeks, with crude oil futures down $10 a barrel due to economic concerns and eroding demand.
The decline in gasoline costs may benefit consumers while also lowering inflation. However, the four-week average of gasoline demand in the United States is at its lowest seasonal levels in 26 years, which may be a symptom of economic instability.
Prior to last week’s decrease, gasoline prices had risen 7.4% in the third quarter, tracking higher crude oil futures following production cuts by Saudi Arabia, Russia, and other OPEC+ members.
Wholesale gasoline prices in the United States are falling, with percentage declines per gallon ranging from 6.9% to 10.8% on Wednesday.
A barrage of poor economic news sucked more wind out of the market. Crude futures finished $5 lower per barrel on Wednesday, and another $1.66 lower on Thursday.
According to the US Energy Information Administration, the four-week average of motor gasoline product supplied – a proxy for demand – totaled 8.3 million barrels per day, down 5% from the same period previous year.
Drivers were deterred by significant rain and flooding on the United States’ East Coast, which affected demand data.
Gasoline stocks increased by 6.5 million barrels last week, far exceeding analysts’ projections.
“All told, fuel prices may be closer to consumers’ pain threshold than inflation-adjusted prices might suggest,” JP Morgan said in a note on Wednesday, implying that high prices had caused people to drive less.
On Wednesday, the 3-2-1 crack spread, a proxy for refining profits, dipped below $20 per barrel for the first time in 18 months, and is down over 40% in the last month.
The gasoline crack was $9.63 per barrel, the lowest since the pandemic of 2010.
Gasoline prices, which are presently averaging $3.77 a gallon, might fall below $3 in regions such as the Midwest and East Coast later this autumn, according to Tom Kloza, worldwide head of energy analysis at the Oil Price Information Service (OPIS).
He claimed there are 20 places in the United places where some stores charge less than $3 per gallon, and he expects half of the country to reach that level by Oct. 31.
The selloff was unexpected given Russia’s prohibition on diesel exports, OPEC’s ongoing oil output curbs, and severe seasonal refinery maintenance restricting fuel supplies, according to Kloza.
According to the ADP National Employment Report released on Wednesday, private payrolls increased by only 89,000 jobs in September, the smallest increase since January 2021.
Oil fell on the belief that global central banks’ 18-month interest rate rises were causing economic harm.
“When positioning is stretched, it can easily turn into a bloodbath,” a petroleum trader said.
Laura Sanicola contributed reporting, and David Gregorio edited the piece.
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