- Average gas prices in the US go to $4.00 a gallon, extending a recent series of price cuts.
- Gas prices have fallen for more than 50 consecutive days due to the destruction of demand after prices soared above $5 this year.
- But a disruptive hurricane could push prices back up, AAA and OPIS said.
Motorists across America will soon be paying an average of less than $4 a gallon for gasoline, as prices have fallen steadily over the past month, but energy experts say an active hurricane season has the potential to push prices back up.
The national price average for regular gas was $4,113 as of Friday, according to tracking by motorcycle club AAA. The price marked the 52nd consecutive drop in a painful few months at gas stations for millions of Americans. After peaking at $5.01, the national average stood at $4.80 a month ago, but was much higher than $3.19 a year ago.
“A back-of-the-envelope calculation suggests that daily costs to consumers will be about half a billion dollars less per day around the middle of this month than in the first 10 days or so of June,” he said. Tom Kloza, global head of energy analysis at OPIS, told Insider this week. He said Friday separately the country was “a few hours” away from the median price dropping below $4.10 a gallon and the median price being $3,939.
The market saw a significant drop in demand as gas prices hit $5 a gallon and that contributed to the sequential drop in pump prices, he said. The downshift happened as the summer season drew closer as Americans wrap up their road trips. Traditionally marked by Labor Day holiday, the summer driving season ends on September 5.
However, what will still be on the calendar is hurricane season. August through October are the peak months in a season that ends on November 30.
Above normal hurricane season
“Atmospheric and oceanic conditions still favor an above-normal Atlantic hurricane season in 2022,” the National Oceanic and Atmospheric Administration, or NOAA, said this week when updating its forecast for 2022. It now sees a 60% chance of a above normal season, sharply lower than the previous call with a 65% chance.
“A lot of production is going offline because of a bad domestic hurricane season,” Skyler McKinley, regional director of public affairs at AAA Colorado, told Insider. “Even what we import… comes through the refineries in the Gulf, it’s not just… [what’s] home-produced,” and a disruptive storm “could really send prices back up.”
NOAA’s forecast, covering the six months of the season beginning in June, calls for 14 to 20 named storms characterized by winds of at least 39 miles per hour. Six to 10 of the storms can become hurricanes, with winds of at least 74 miles per hour. Of those, the agency said, three to five could become major hurricanes with winds of 111 mph or more.
“I can promise you that there will be a reduction of [gas] prices after Labor Day unless … a major storm shuts down refining capacity,” McKinley said.
“Historically, those costs have generally been regionalized, so it’s not necessarily true that people in Colorado will pay more because of severe hurricanes, for example. But people in the Gulf region will and depending on how bad it is across the country. ”
The market has been “lucky” so far this year with no major hurricanes or refinery outages, Kloza said. “If we don’t get a tropical storm threat in the Gulf of Mexico, we’re going to see retail prices drop below $4 a gallon probably around August 15 or 16,” he said. Gas prices would bounce back quickly in the event of a storm outage, but perhaps not as high as $5,0150, he said.
Also, Russian President Vladimir Putin could try to hurt the West more by restricting crude oil, Kloza said, which would push gas prices back up. Brent crude, the international benchmark, traded around $95 a barrel on Friday and West Texas Intermediate crude, the US benchmark, traded around $88.80 a barrel. Benchmarks lost ground last week but were still up about 18% and 22% so far.
Gas prices started to rise after Putin launched a war against Ukraine in late February. The median price in the US was $3.60 on March 1, McKinley said. Gas prices will eventually return to pre-war levels, he said.
“Will that happen in the near term? Look, if it does, it’s bad news. If prices fall back to $2.50 or even $3 very quickly…it’s a sure sign that we’re facing some major economic problems.” have either experienced or are in the offing,” McKinley said.