The national average for a gallon of gas has fallen below $4 for the first time since early March, a key psychological threshold for cash-strapped Americans even as inflation remains elevated.
The U.S. average dropped 2 cents overnight to $3.99, AAA reported Thursday, a 20% pullback from its June peak above $5.
However, that relief has been slow to come to the Spokane area. On Thursday, the average price of a gallon of regular gasoline was $4.63 and diesel was $5.46 in Spokane, according to AAA.
In Coeur d’Alene, the average price for gas was $4.51 and $5.42 for diesel.
The run-up in gas prices earlier this year is tied to the Russian invasion of Ukraine and the ensuing turmoil in energy markets.
Relentlessly high inflation is the nation’s most vexing economic problem, prompting months of recession talk even as job growth has soared – U.S. employers added 528,000 jobs in July – and consumer spending has remained resilient.
But lower pump prices mean there’s less drag on the broader economy, as evidenced by federal data released Wednesday that shows inflation eased in July.
Though overall prices remain elevated, climbing 8.5% year over year, they’ve moved away from the pandemic peak of 9.1% recorded in June, when the U.S. fuel average topped out at $5.02. The gasoline index fell 7.7% in July.
For consumers and businesses – many pinched by more expensive diesel costs – it’s no small reprieve. Americans’ gasoline spending is now nearly $400 million a day lower than it was in June, according to an estimate from the fuel-tracking app GasBuddy.
More than 60% of the nation’s fuel stations have regular unleaded gas priced at $4 or less, according to AAA spokesman Andrew Gross, while a few have dipped below $3.
Gas and oil prices have fluctuated wildly on fears the Russian conflict would curtail supply and disrupt energy markets, as well as from the ensuing sanctions on Moscow and the continuing fallout from the coronavirus pandemic.
Crude prices that had been hovering near $80 a barrel in January had pushed past $120 by March.
Pump prices quickly followed, swelling nearly 20% a week after the Feb. 24 invasion.
“We’ve never seen anything like 2022 at the pump … we’ve seen gas prices behave in ways never witnessed before, jumping from $3 to $5 and now back to $3.99,” said Patrick De Haan, head of petroleum analysis for GasBuddy.
But oil prices have been cooling since early June, with West Texas Intermediate crude, the U.S. benchmark, now hovering around $93 per barrel. Gasoline costs are now in line with levels seen before the war.
Experts say the recent decline in crude prices stems from a series of recessionary warning signs in several large global economies.
Slower economic growth crimps demand everywhere – not only in the United States and Europe but also in emerging markets, said Pavel Molchanov of the investment bank Raymond James.
Because oil is a global commodity, a supply or price shock in one part of the world will reverberate everywhere.
“This is a timely reminder that oil is a global market, and price movements up or down are subject to macro trends over which governments have minimal control,” Molchanov said in an email.
Economists have been warning of a possible recession in the United States for months.
Jeff Buchbinder, chief equity strategist for LPL Financial, said in a Monday note that he thinks the odds of a U.S. recession in the next year are “perhaps a coin flip or better,” despite the Labor Department’s blockbuster jobs reading on Friday.
England’s central bank warned last week that Britain would enter a protracted recession by the last quarter of 2022.
The National Bureau of Economic Research has not declared the United States to be in a recession, even though economic activity has already declined for two consecutive quarters.
Still, fuel demand is already down: As measured as a four-week moving average, it stood at 8.6 million barrels a day as of July 29, according to the U.S. Energy Information Administration. That’s 8.7% lower than a year ago.
To offset higher gas prices, people are driving less, combining errands or postponing vacations, according to a July survey from AAA.
Some respondents reported switching to a more fuel-efficient vehicle, buying an electric car, or using public transportation.
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