Reduced Gas Prices are Beginning To Impact Inflation

by Wall Street Rebel - Michael London | 07/14/2022 9:56 AM
Reduced Gas Prices are Beginning To Impact Inflation

Drivers can breathe a sigh of relief thanks to a drop in prices that has been occurring over the past four weeks. The length of time that the decline continues will be determined by factors including the weather, war, and demand.


The price of gasoline, which had been steadily climbing over the past few months, has begun to fall in recent weeks, providing much-needed relief to consumers. The price of gasoline was a significant contributor to the 9.1 percent year-over-year increase in U.S. consumer prices seen in June, which represented the highest annual increase seen in the country in the last four decades.

The collapse in energy consumption that occurred in early 2020 as a result of the Covid-19 pandemic caused the economy to become immobilized. Still, gas prices have fallen for 28 days in a row, making this the longest reduction since the collapse.

According to energy researchers, consumers in the United States spend 140 million dollars less each day on gasoline than they were a month ago. There is a good chance that this pattern may change, particularly if a hurricane causes damage to a refinery located on the Gulf Coast; global oil supplies are still quite tight.

But for the time being, the country's stockpiles are quietly expanding. This is partly happening because the government is continuing to release oil from its strategic oil reserves. At the same time, consumption has decreased.

According to the AAA car club, the national average price for a gallon of normal gasoline on Wednesday was $4.63. This decreases by more than 2 cents from the previous day's price. In the past week, prices have decreased by 15 cents, and in the past four weeks, prices have decreased by 38 cents. This comes after the average gas gallon price rose to just over $5.

Over the past week, prices have dropped by at least 16 cents in economically significant states such as Texas, Ohio, Illinois, and California. In each of these states, the decline has been unusually precipitous.

Since the continued rise in gasoline prices posed a political risk for President Joe Biden, he wasted no time praising the recent drop in those costs. President, Joe Biden, tweeted on Wednesday that "the average price of gas has reduced by 40 cents a gallon in the last 30 days."

He said, "That's a sigh of relief for American households, but the price of a barrel of oil has dropped $20 while the price of a gallon of petrol has only dropped 40 cents."

Oil and gas firms are responsible for passing these savings on to their customers.

It is especially crucial for families living on lower incomes to pay attention to the price of gasoline because these families typically commute further to work and drive older vehicles that are less fuel efficient.

However, consumers' perceptions of inflation are shaped not just by the prices they see at the pump but also by the day-to-day rises and falls they see on the street corners. The drivers are starting to notice the difference and are pleased with what they see.

A professor of health science named Melanie Wilson-Lawson expressed her optimism that President Biden's discussions during his current trip to the Middle East will inspire oil producers to expand their supplies and bring prices down. However, it is doubtful how much more Saudi Arabia and other Middle Eastern states are capable of producing, even if they wanted to. Political unrest has hampered production in a number of countries, but it has been particularly detrimental in Libya.

Fuel has an effect on the prices of all items that are shipped, but it is especially noticeable in the food industry.

The price of fuel, notably diesel and jet fuel, is falling, although at a slower rate than the price of gasoline. This has a significant impact on the profits of agricultural businesses, construction enterprises, and airlines.

The price of a gallon of diesel at the national average now stands at $5.61, which is 16 cents less than it was a month ago. In comparison, gasoline prices have decreased by 7 percent, and diesel prices have fallen by 3 percent.

In comparison, wholesale gasoline prices have decreased by around 24 percent over the past month. Wholesale jet fuel costs, which do not contain taxes like those of other fuels, have decreased by approximately 11 percent.

Because of Russia's invasion of Ukraine in February, less supplies are coming from Russia. Thus, a huge increase in European exports has made up for the shortfall. This has contributed significantly to the slower reduction in domestic diesel prices.

Since the global diesel market became more competitive, the amount of diesel that is being imported into the United States has decreased to a trickle.

The decline in costs at the pump is a direct result of the reduction in global oil prices, which have been falling steadily over the course of the past month in response to rising signals that the global economy is faltering.

Since Moscow has successfully replaced shipments to European markets with sales to China, India, and South America, concerns that strengthening Western sanctions on Russia would substantially cut world oil inventories have proven to be overstated.

Predictions that the economy of China, the world's largest crude oil importer, would go up have also not been met. This is because of lockdowns in significant cities as a response to ongoing surges of Covid-19.

U.S. gasoline prices have followed a drop in the futures market for both crude oil and gasoline. Those markets are down because investors are worried interest-rate hikes will slow the economy as central banks aggressively combat inflation.

According to the Energy Information Administration, demand for gasoline, jet fuel, and diesel in the United States are down by more than 10 percent from 2019 levels before the pandemic began. Costs at the pump have dropped as a result.

Considering that the cost of oil is quoted in U.S. dollars, a rise in the dollar value would make the commodity more expensive for those using other currencies. Earlier this week, the dollar index, which tracks the currency against a basket of six counterparts, climbed to 108.56, its highest level since October 2002.

The decline in crude oil and gasoline futures prices has led to a decrease in the price of gasoline in the United States. These markets are falling because investors are concerned that rising interest rates would create a slowdown in economic activity as central banks become more active in combating inflation.

Before the epidemic began, the demand for gasoline, jet fuel, and diesel in the United States had dropped by more than 10 percent from its levels in 2019. This information comes from the Energy Information Administration.

Due to the fact that the price of oil is expressed in U.S. dollars, a rise in the dollar value would increase the cost of the commodity for individuals whose primary currency is not the dollar. The dollar index, which monitors the value of the currency compared to a group of six other currencies, reached 108.56 earlier this week, the highest level it has reached since October of 2002.

Because petroleum needs to be processed and refined before it can reach gas stations, which base their retail prices on the wholesale price, the price of gasoline normally follows the price of oil by about a week when it goes up or down.


                     U.S. gas prices drop for 4th straight week




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