The price of gasoline is plummeting so quickly that it is beginning to put actual money back into drivers’ pockets, contradicting prior predictions and providing an unexpected holiday surprise.
Filling up is now as cheap as it was in February, right before Russia invaded Ukraine, triggering a worldwide oil crisis. The average countrywide price of a gallon of normal gasoline on Wednesday was $3.50, according to AAA, and gas price tracking website GasBuddy predicted it may go below $3 by Christmas. And all of that relief is likely to have contributed to brisk buying over the Thanksgiving holiday.
“People are realizing that they might be back to spending $50 to fill their tank instead of $80,” said Emma Rasiel, a professor of economics at Duke University. “It is the main signal consumers notice on inflation. It is the one thing they are likely to track, how much it has gone up or down, because every week they need to fill up their car.”
However, Rasiel noted that less cost gas might mislead buyers. Other commodities and services prices are far less unpredictable, and there is little sign that this period of more economical petroleum is lowering the cost of other things.
Even as the drop in gas prices fuels a national Christmas buying binge, it is a reminder of the global financial burden that individuals and businesses are facing. Prices are decreasing as demand for oil and gas falls as countries prepare for a recession, coronavirus outbreaks in China threaten massive financial upheaval, and drivers cut back on petrol-guzzling to save money for increasing mortgage payments and stock market losses.
Earlier fears that Russian oil sanctions would cause a supply deficit and send prices skyrocketing near the end of the year have given way, for the time being, to faltering economies and anxious financial markets.
“We’re heading into serious recession in Europe and further economic slowdown in the U.S. as people struggle with high interest rates and worry about their personal wealth and savings,” said Ben Cahill, an energy security analyst at the Center for Strategic and International Studies. “Add it all up and it creates a bleak picture for oil demand. Prices are reflecting that.”
Some significant U.S. oil refineries that have been out of action for months for maintenance and repairs are also helping to keep prices low at the time.
The turbulence in China, though, is a significant influence. The projected economic consequences has driven oil markets negative as its officials hint that further coronavirus lockdowns are inevitable, sparking demonstrations across the nation.
According to Capital Economics, China accounted for 16% of global oil consumption last year, and its purchases of oil are expected to fall by 1 million barrels per day in December as coronavirus illnesses increase. The impact of such a decline on global oil markets is significant, with Brent crude falling by as much as $10 per barrel, or more than 10%.