According to economists, Americans can expect some relief from record-high gas costs when oil prices fall below $100 per barrel.
The U.S. crude benchmark sank 6% to $96.84 on Tuesday, from nearly $130 last week – its highest level since 2008. According to investment firm UBS, oil prices are falling as Russian and Ukrainian leaders apparently negotiate a possible truce.
“The rise reflects reducing expectations of future supply interruptions as a result of Russia-Ukraine peace talks,” UBS analysts wrote in a report. “There were also indications that, while European energy corporations continue to avoid Russian oil, India has purchased discounted Russian crude, potentially lessening the impact of import bans in the United States, the United Kingdom, and Canada on world supplies.”
According to Patrick De Haan, head of petroleum analysis at GasBuddy, gas prices are now falling modestly in a few U.S. cities, and the decline should soon be seen at additional service stations around the country.
According to GasBuddy, this would be a huge drop from the average of $4.32 per gallon Americans have been paying for the past two weeks, up 84 cents from only a month ago. According to AAA, other states, such as Alaska and California, are paying average costs of $4.73 and $5.75, respectively. The higher prices have put even more burden on American households’ wallets, who are already dealing with growing inflation.
Oil prices, for the most part, follow gas prices – as oil prices rise, so do gas prices.
In a statement released Monday, AAA spokesman Andrew Gross stated, “It bears repeating that the cost of oil accounts for nearly 50% of what drivers pay at the pump.” “This war is upsetting an already tight global oil market, making it difficult to tell whether we are approaching a peak in pump prices or if they will continue to rise. Everything hinges on the path of oil prices.”
As the COVID-19 pandemic spread, gas prices plummeted to an average of $1.94 per gallon in April 2020. However, as the US economy recovered and demand increased, fuel prices began to rise dramatically in the fall of that year. Gas had risen to $3.40 by December 2021, while the most severe inflation in four decades had driven up the cost of everything from groceries to rent.
Oil and gas prices have continued to rise this year, after Russia’s massing of soldiers on the Ukraine border. After Russia started a significant invasion on February 24 amid fears that the battle would disrupt global crude supplies and provoke economic penalties, prices skyrocketed.
Last week, prices rose even higher as the United States put a ban on Russian oil imports. Russia is a major crude oil exporter, accounting for roughly 12% of global supplies. Any disruption to such exports will almost certainly raise gas costs for customers everywhere.
Despite the agony at the pump, according to a recent CBS News poll, 63 percent of Americans support the Biden administration’s sanctions on Russia, including the restriction on Russian oil, even if it means higher gas prices.