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Filling up the gas tank is not as painful as it used to be.
Gasoline prices, which hit an all-time high earlier this summer, have fallen sharply in recent weeks. They are now below $4 a gallon in some parts of the country, even as the national average remains above that level.
That’s a relief for drivers, and for inflation, which hit a four-decade high in June.
How much have prices dropped?
According to the American Automobile Association, the average gas price across the country was $4.08 on Saturday. That’s down almost a dollar from mid-June, when pump prices hit an all-time high of $5.01 a gallon.
Some parts of the country, like Texas, have seen an even steeper drop, bringing relief to drivers who had seen prices rise earlier this year following the Russian invasion of Ukraine.
“Yesterday I filled the tank and it was $3.35. So yeah, I was excited about it,” says Linda McDaniel, who drives 60 miles every day to get to her job in San Antonio. “Because I have to travel so much, I drive a Honda Civic, which gets pretty good gas mileage. But with those higher prices, it really cost a lot more to fill my tank.”
What is behind the sharp drop in gasoline prices?
It is partly a function of supply and demand.
When gas station prices rose above $5 a gallon, drivers adjusted their behavior, trying to limit how much they drove. They shared rides, combined errands and eliminated unnecessary trips.
McDaniel canceled a road trip to Colorado this summer.
Oil consume in the US it’s been about 9% lower in recent weeks than it was last summer, a pretty dramatic drop in demand.
At the same time, national crude oil supply It has increased more than 6% from a year ago.
Growing concern about a economic slowdown around the world has also weighed on crude oil prices, which are about half the cost of gasoline.
All of this is a recipe for lower prices at the pump.
“Americans as a whole are going to spend $340 million less on gasoline today than they did on June 16 when prices peaked,” says oil analyst Patrick De Haan of price-tracking website GasBuddy.
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What does this mean for inflation and the cost of things?
Falling gas prices will certainly help in terms of the cost of living.
Annual inflation in June reached 9.1%, the highest since late 1981, and gasoline prices have a great driver of that increase.
The problem is that other prices have also been rising, including some that are stickier than gasoline, which tends to go up and down.
McDaniel, for example, rents a couple of storage units and says the rent has gone up $100 a month. She is also worried about her utility bill, as her air conditioner has been running overtime due to the Texas heat.
“It’s been in the 100s since May,” says McDaniel. “So the electricity bills have been out of this world.”
So far, consumers have seen little change in the cost of food or housing, both of which make up a bigger part of the typical household budget than gasoline.
So while many drivers will be grateful for cheaper gasoline, it’s not a panacea for inflation.
“Yes, it’s a welcome relief,” McDaniel says of gas prices. “But I mean, you can definitely see [inflation] in almost all. Just like our soda machine, the price went up 25 cents overnight. Every little thing you notice goes up. Even a pack of gum went up 20 cents.”
Where do gas prices go from here?
Pump prices could fall further in the short term, but it’s harder to say what will happen later this year.
De Haan, the GasBuddy analyst, predicts that the average gas price across the country will drop below $4 a gallon in the coming days.
But be warned, there are some wild cards out there. A hurricane in the Gulf of Mexico, for example, could bring down drilling rigs or refineries, limiting gasoline supplies.
Geopolitical threats in Europe or Asia could also push gas prices back up.
All of that makes it hard to say whether relief at the pump is here to stay.