NEW YORK: US gasoline prices could fall below $3 a gallon this summer for the first time in over four years as a stretch of bad weather events dampens fuel demand and a jump in imports fills inventories.
Gasoline prices have been in a lull in recent months, a boon for Americans traveling this summer. Consumers endured record prices at the pumps after Russia's 2022 invasion of Ukraine upended energy markets.
Gasoline prices fell 8.3% over the 12-month period ended June, the latest Consumer Price Index report showed, as US crude prices tumbled more than 20% amid concerns over lackluster demand and a trade war with China. Lower oil prices reduce the cost to refiners for producing motor fuels, with some of the savings typically passed on to consumers.
US President Donald Trump has promised to lower fuel prices, although analysts say presidents ultimately have little influence on pump prices.
Fuel demand in the week ended July 4, typically among the periods of highest consumption, was down 2.5% from the same time last year. Analysts said the slowdown was likely due to extreme heat blanketing parts of the country, which may have discouraged some driving.
The national average price of gasoline after the Independence Day holiday dipped to $3.14 per gallon, the lowest during summer months in four years, AAA data showed. Average gas prices across the US have not fallen below $3 a gallon since May 2021.
Summer is typically the peak season for gasoline consumption in the US, but gasoline product supplied, the US Energy Information Administration's proxy for demand, has averaged 9.2 million barrels a day over the past four weeks, down by 1% from the same period last year.
More fuel-efficient vehicles on the road and post-pandemic changes in driving patterns - particularly remote working - are expected to permanently reduce US gasoline consumption from its peak of more than 9.3 million bpd in 2018.
"As we head toward August, I think gasoline will see additional weakness," said Patrick De Haan, head of petroleum analysis at GasBuddy. "The national average has a good chance of falling below $3 per gallon in September," he added.
That downward momentum could continue, De Haan said, as Opec's decision to boost crude production by a larger-than-expected 548,000 bpd in August adds more pressure to oil prices.
Imported gasoline flowing into the US has also caused a surge in storage demand.
Weekly US gasoline imports peaked in mid-June at 100,700 bpd, the highest in over a year, government data shows, driven by an influx of shipments from Canada and Europe. Imports in June were up around 7% compared to the same period a year ago.
In the US, demand for tanks to store gasoline has climbed since March, reaching a three-year high in June, according to data from storage broker The Tank Tiger.
"If refiners are producing more gasoline, you need a place to park it if it's not being consumed," said Steven Barsamian, chief operating officer at The Tank Tiger. — Reuters
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