Gas prices keep falling, but will the trend continue? Here’s what experts say

Gas prices are finally coming down from their record highs, but will it last?

The answer so far isn’t too clear.

For the 28th consecutive day, prices at the pump fell Tuesday, July 12, when the national average hit $4.66 per gallon, down 36 cents from June’s record-breaking high of $5.01 per gallon, data from AAA shows.

Oil prices, too, are starting to drop. As of July 12, the price for a barrel of oil dipped below $100 for the first time since May 10, according to The Wall Street Journal.

Before you plan a cross-country road trip in a gas-guzzler though, experts warn the trend might not continue in coming weeks.

What’s going on with gas?

In 2020, at the start of the pandemic, gas and oil prices plummeted. As the economy recovered and inflation increased, however, gas prices have done more than catch up: They skyrocketed to record-breaking highs.

Last month, gas prices across the country averaged more than $5 a gallon, an all-time high.

Since mid-June, however, prices have trended downwards, steadily falling.

According to the latest news release from AAA on July 11, the top 10 largest weekly decreases in gas prices occurred in Texas, Ohio, Illinois, California, Wisconsin, Indiana, Kentucky, Alabama, Virginia and Florida.

The least expensive markets in the U. S. include South Carolina, Georgia, Mississippi, Louisiana, Texas, Alabama, Arkansas, Tennessee, North Carolina and Kentucky.

South Carolina, Georgia and Mississippi had the lowest average price at $4.18 per gallon at the time of the release.

But while gas prices have dropped for a number of reasons, they could bounce back up in the near future, analysts warn.

What determines gas prices?

The price of gas that consumers see at the pump is largely determined by the price of crude oil, the main ingredient making up the gas that goes in vehicles.

Oil prices have been on the rise for months as the economy has simultaneously bounced back from the coronavirus pandemic slump. When Russia invaded Ukraine, things only got worse as investors panicked. Because of this perfect storm, oil prices have been climbing, dragging retail gas prices along.

As Clifford Atiyeh reported for Car and Driver, between the Russian-Ukrainian war, inflationary pressures, changing interest rates and ongoing supply-and-demand concerns, “it has been another unpredictable year, to put it lightly.”

Gas, like every other good and service, is also influenced by supply and demand.

For example, at the start of the pandemic, when the supply of oil and gas were still high but the demand for gas all but disappeared as people stayed home, the price plummeted.

Analysts are noticing a similar trend now.

As oil prices continue to fall, the demand for gas has stayed unusually low, according to the U.S. Energy Information Administration. Data from the organization’s Weekly Petroleum Status Report indicates that gas consumption in the U.S. during the second quarter of 2022 and into the start of July is lower than the same period in 2021. A similar trend appeared in monthly supply data.

A combination of oil prices and demand are determining gas prices right now. People in the U.S. are not using as much gas as usual. The price of oil is dropping. Together, these two influences are working together within the economy, creating the right balance to lower gas prices.

What to expect in coming weeks

Analysts are conflicted about what the future might bring for gas prices, Patrick De Haan, GasBuddy’s head of petroleum analysis, told McClatchy News.

“Will this stick around? I guess that’s anyone’s best guess given the amount of volatility in the market,” De Haan said. “There’s no guarantees.”

Some analysts are more optimistic.

Trilby Lundberg, an industry analyst with the Lundberg Survey, said in a statement to the Associated Press that “assuming oil prices do not shoot up from here, motorists may see prices drop another 10-20 cents as the oil price cuts continue making their way to street level.”

And Mark Schieldrop of AAA Northeast told the Boston Herald that “it’s nice to see the relief coming to motorists, and we expect this trend to continue.”

“If oil falls below $100 and stays there, we could see gas prices coming closer and closer to $4,” he told the newspaper.

The uncertainty within the market extends to banks, which are also issuing wildly different predictions for the future of oil and gas prices.

CitiBank, for example, said last week that oil prices could tumble to as low as $65 a barrel by the end of the year if the economy enters a recession, according to Bloomberg. Meanwhile, JPMorgan is warning of “stratospheric” oil prices reaching $380 a barrel, Bloomberg reported.

The uncertainty within the market is certainly strong, but there is one similarity between every perspective, according to De Haan.

“The one underlying common denominator here is that volatility could lead us to drastically different outcomes,” he said.

Several factors over the coming weeks and months will dictate where gas prices go from here, including the weather as hurricane season begins, U.S. policy changes, upcoming Consumer Price Index data and the outcome of second quarter earnings reports for the world’s biggest companies, De Haan said.

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