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NEW YORK — Streets will be crowded this Fourth of July weekend, but many travelers have at least one thing going for them: much cheaper gas prices than last year.
A record-breaking 43.2 million Americans are expected to travel by car this holiday weekend, according to the AAA. That’s 2.4% more than last July 4th.
And yet gasoline prices are much lower. The statewide average for regular gasoline fell to $3.55 a gallon ($3.96 a gallon in Utah) on Thursday, according to AAA. A year ago, a gallon of regular oil sold for an average of $4.87 per gallon.
This kind of price drop is almost unprecedented.
According to the US Energy Information Administration, the average gas price for the week ended June 26 was $3.57 a gallon. That’s $1.30, or 27%, down from the same period last year.
According to John LaForge, head of real asset strategy at the Wells Fargo Investment Institute, this is the second-biggest price decline in a year in the week ending July 4 since EIA data began 33 years ago.
The only major 12-month decline occurred during a historic downturn: the Great Recession. Between June 30, 2008 and June 29, 2009, gasoline prices fell $1.45 per gallon, or 35%.
“That’s great. Gasoline prices are a leading economic indicator for many Americans,” said Patrick De Haan, head of petroleum analysis at GasBuddy.
The average driver is spending $20 less per tank of fuel than they did at this point last year, De Haan said.
Although pump prices have eased from last year’s record highs, gas prices have been cheaper in the summer of 2021 and certainly in 2020 as COVID-19 crippled much of the economy.
In Ohio, California, pump prices are falling
Still, gas prices have fallen in all 50 states over the past 12 months, according to the AAA.
Motorists in Indiana saw the sharpest drop in gasoline prices last year, with the state average falling $1.58 a gallon. Other states with sharp falls in gasoline prices include Ohio ($1.48), California ($1.47), and Illinois ($1.47), according to the AAA.
The smallest drop in gas prices in 12 months was in Washington state, where the average fell just 50 cents a gallon. Washington recently replaced California with the unwelcome distinction of having the most expensive gas prices in America.
Of course, consumers still struggle with the high cost of living at the supermarket, buying a car and paying rent.
“Americans have been hit by so many other bullets. They save at the pump but spend more elsewhere,” said De Haan.
High inflation elsewhere is a key reason De Haan expects gasoline demand for the 4th July weekend to be 5% to 10% below 2019 levels. This is despite the fact that AAA expects the number of people traveling to their destinations this weekend to be 4% higher than in 2019.
Why Gasoline Prices Have Fallen
The drop in gas prices is undeniably positive for consumers. However, not all factors behind the decline are encouraging.
After skyrocketing last year, oil prices have fallen in part on fears that Federal Reserve rate hikes could slow the economy into recession.
Another factor: Despite fears of disruption, Russia’s oil exports have not been affected by either the war in Ukraine or Western sanctions.
“We believe prices are flat in the near term,” Wells Fargo’s LaForge said, “as markets weigh concerns about an expected recession against global supply.”
But beyond that, La Forge expects the oil market to tighten over the next year and “push prices higher.”
A wild card is the war in Ukraine after Russia’s short-lived Wagner uprising, which is threatening Vladimir Putin’s rise to power.
So far, the oil market has largely spared the unrest in Russia, and traders are betting the country’s exports will remain intact.
However, GasBuddy’s De Haan says Russia remains a source of risk for gas prices.
“The situation is still a bit like a powder keg. It could lead to even more explosiveness in oil prices,” he said.
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