Americans who fill up their cars this Memorial Day weekend will get a break — at least compared to a year ago, when gas prices soared.
The national average price of regular gasoline is a full dollar per gallon lower than a year ago. Drivers paid more than $4.60 in May 2022 and reached $5 in the second week of June. They paid just over $3.50 a gallon for regular gas this week, according to AAA, the motoring club.
Many energy experts said they expected prices to remain around those levels for most of the summer, barring a major disruption to global oil supplies.
Because gasoline prices are posted on street corners on large, colorful signs, they can have a strong psychological impact on consumers, especially middle- and lower-income earners, who tend to drive older, less fuel-efficient vehicles and spend more of their income on energy than rich people.
“Who wouldn’t be happy to save money?” said Eddie White, 46, who uses his pickup truck to make deliveries and offer rides through Uber. Mr. White, who lives in the Houston area and fills up at least once a day, said he saves about $420 a week. He uses that money to pay for classes to help him become an insurance adjuster.
Aaron Hawkins, 22, manages a phone store and serves in the Army Reserve. His reserve duties require him to commute regularly between Houston and Baton Rouge, La. He said he saves $150 to $200 a month on gas.
“It’s a lot better for everybody,” he said of the lower prices.
Prices rose last year after Russia invaded Ukraine in February. Oil traders had expected Russian exports to fall due to sanctions imposed on the country by the United States and its allies in response to the invasion.
The war was still raging, but Russia found a way to continue selling its oil, albeit at greatly discounted prices, primarily to China and India. As a result, global oil reserves remain abundant. It also helped that the United States and other industrialized countries released oil from their strategic reserves as prices rose.
At the same time, the demand for oil and the fuels produced from it did not shoot up. In the United States, motor fuel consumption has not changed much since last year and has not yet reached pre-pandemic levels. But that may be starting to change. Demand for gasoline has increased over the past month, and AAA is forecasting a 7 percent increase in holiday and weekend travel over last year.
As supply was stronger and demand weaker than many traders and analysts expected, the US benchmark oil price gradually fell from around $120 a barrel last summer to around $72 a barrel on Thursday.
Prices rose briefly last month after Saudi Arabia, Russia and other major oil producers said they would cut production by 1.1 million barrels a day, or a little more than 1 percent of global supplies.
However, that rally has fizzled and oil prices have been falling in recent weeks. Many traders are increasingly worried that the Federal Reserve’s interest rate hikes, which are meant to reduce inflation, will slow the economy and could cause a recession. Central banks in Europe are also implementing similar policies.
Recession fears have also risen in recent weeks due to the stalling of debt ceiling talks between President Biden and House Republicans. Elsewhere, signs that China and India, the world’s most populous countries, are not buying as much fuel as expected also weighed on oil prices, according to a report by research and consultancy firm Eurasia Group.
“Last year you had higher demand growth and lower supply growth,” said Linda Giesecke, head of demand analysis at ESAI Energy, a consulting firm. “This year, demand and supply are relatively balanced.”
After nearly two years of battling high inflation, many Americans appear to have changed how and where they buy gasoline and diesel, said Tom Kloza, global head of energy analysis at the Oil Price Information Service. Many people have started buying fuel from wholesalers, who often offer lower prices than independent gas stations.
“Costcos, BJs, Sam’s Clubs, Buc-ees, supermarkets, they’ve all gained market share from 2020 to 2022 and they’re not giving it up,” Mr. Kloza said. “It’s harder for the little guy,” he added, referring to gas stations that carry the brands of major oil companies like Exxon and Chevron, but are usually owned by families or small businesses.
Warehouse stores and other large retailers can offer lower prices because they negotiate the best deals with refiners and buy their gasoline in bulk.
Another factor dampening prices is the growing popularity of electric cars. Battery-powered vehicles could become increasingly important in reducing demand for fossil fuels and curbing climate change over the next decade.
Patrick De Haan, head of crude oil analysis for gas price tracker GasBuddy, said he expects the national average price of regular gas to stay below $4 a gallon this summer. He estimated that consumers will spend $1.6 billion less on gas over the Memorial Day weekend than last year. The Energy Department recently estimated that the national average price of gasoline this summer will be $3.40 a gallon, down about 20 percent from last year.
Of course, prices vary widely across the country, due in part to differences in state gas taxes and the cost of real estate, labor and other expenses. The Energy Department estimated the average price of gasoline on the West Coast will be $4.30 a gallon this summer, about 90 cents above the national average.
Gasoline prices are usually highest between April and September, when people drive more. In addition, summer grade gasoline tends to be more expensive to produce because pollution regulations require it to be blended differently.