The White House has been taking credit for falling gas prices — but experts say the real reason for the drop is that Americans are cutting back on driving and postponing vacations due to record levels of inflation.
Gas prices have dropped to a nationwide average of $3.94 per gallon of regular unleaded fuel, which is considerably higher than the $3.18 that it cost a year ago at this time. Just two months ago, the national average surpassed $5 per gallon, an all-time high.
Before the recent dip, the Russian invasion of Ukraine exacerbated rising gas prices that were caused by snarls in the supply chain.
President Biden claims that his decision to release 180 million barrels of oil from the Strategic Petroleum Reserve is the reason for the recent drop.
“I promised I’d address [Russian President Vladimir] Putin’s price hike at the pump, and I am,” the president tweeted on Aug. 11. “We’ve used our strategic petroleum reserve to get relief to families fast — and we rallied our allies and partners around the world to do the same. More work remains, but prices are dropping.”
The price of US crude fell to a six-month low of $86.53 a barrel on Tuesday — which is nearly $4 cheaper than a week ago, though more than $19 higher compared to a year ago at this time. On Wednesday, US crude rose 1.6% to $87.92 per barrel.
But Biden’s own Treasury Department acknowledged last month that the impact of the release was mild and that it lowered the price of gasoline between 17 cents and 42 cents per gallon.
Experts told The Post that the administration is unjustifiably tooting its own horn.
“Gas prices have fallen for multiple reasons, but Americans cutting back on consumption is the major factor,” Anthony Schiavo, an analyst at Boston-based Lux Research, told The Post.
Schiavo cited government data which showed that demand for gas dropped to 8.857 million barrels per day during the four-week period that spanned July. That number is much lower than last year’s number of 9.456 million barrels per day during the same time period.
Sky-high gas prices and record levels of inflation have spurred Americans to change their driving habits, according to AAA.
A recent survey by AAA found that some two-third of adults (64%) have changed their driving habits since March and that 23% of those polled said they made “major changes” to cope with the surging gas prices.
Experts agree that a drop in demand is the key factor that has driven down gas prices.
“Economists typically attribute a drop in both the price and quantity in a market to be associated with falling demand,” Tomas J. Philipson, a University of Chicago economist who served as former chairman of White House Council of Economic Advisors under President Trump, told The Post.
“Thus, as both gasoline prices and travelling have been dropping, demand must have retracted. If increased supply was the driving cause of price declines, then traveling would increase due to the price drop.”
Last month’s figure is also about the same as the number of barrels consumed by Americans in July 2020 — which was the height of pandemic-related lockdowns.
“Continued SPR releases have relatively minimal impact and ultimately create bigger problems down the road for refilling the reserve, potentially at higher per barrel costs than today,” Benjamin Dierker, the director of public policy at Alliance for Innovation and Infrastructure, told The Post.
Experts also cite other factors, including the reduce speculative activities in the oil markets as well as continued COVID-related lockdowns in China, which has also dampened demand.
“Gas prices have fallen because speculators have left the market,” Josh Answers, the host of the online show The Trading Fraternity, told The Post.
“A big part of the recent oil run that has been overlooked is the number of people trading futures, which in turn helps keep prices going up.”
According to Answers, futures contracts on oil have dropped over 30% since last month.
“The other factor is China,” he said.
“Over the last three months, all the lockdown news out of China made many people reconsider China’s oil demand and this helped bring the demand down considerably.”