Crude oil prices hit a three-year low this week, a milestone that comes after gasoline prices have fallen for six consecutive weeks.
The decline has little to do with direct intervention by the Biden administration and is largely the result of a confluence of economic factors, but it could provide a positive headwind for VP Harris' fiscal agenda in the final months of the election season.
Patrick DeHaan, head of petroleum analysis at GasBuddy, said the market is regaining a better sense of balance as global events that contributed to higher gasoline prices in recent years, such as the coronavirus pandemic and Russia's 2022 invasion of Ukraine, “receive distance.”
“While falling gas prices may certainly be good news for the current administration, we expect to continue to hear a lot from politicians on both sides of the aisle on this issue,” he said.
National Average gasoline price The price per gallon was about $3.25 on Wednesday, down from $3.31 a week ago and $3.45 a month ago.
DeHaan said the drop in prices is common in the early fall.
“Americans are less inclined to get outside in the fall, and especially in the winter, which is leading to lower demand for gasoline,” he said. “And we're less than a week away from switching to an easily implemented, cheaper gasoline blend, which we're calling winter gasoline.”
DeHaan said another factor was the drop in oil prices in recent weeks. Oil prices hit $65 a barrel earlier this week, the lowest since 2021, which DeHaan attributed to a combination of economic uncertainty and falling demand in China.
West Texas Intermediate, the U.S. crude benchmark, was trading around $68 a barrel on Wednesday afternoon after rising to as high as $83 a barrel in early July.
Meanwhile, Tom Kloza, global head of energy analysis at Oil Price Information Service, said the decline in crude oil prices was due to factors such as expectations of increased supply in the coming months.
Kloza specifically cited plans by the oil-producing group OPEC+.Oil production to increase in DecemberThe plan was originally scheduled for October but has been postponed, but is expected to increase the amount of oil supplied to the market once it comes into effect.
“Demand and supply are pretty much in balance, but the idea that on December 1st we're seeing an increase in oil supply from OPEC+ countries and an increase in non-OPEC countries means that nobody is chasing higher oil prices, nobody is putting money in oil futures, and I think that's why the recent numbers are so painful,” Kloza said.
“The market is looking to the future and is very nervous about December and also very nervous about 2025 because even some of the more bullish investment banks think next year is going to be a volatile year for oil,” he added.
The drop in stock prices comes after weak employment data last month and a subsequent drop in stock prices, raising fears of an economic recession.
The White House doesn't set gas prices, but the president's approval rating frequently rises and falls depending on prices and the overall economic situation. Biden's approval rating has plummeted at a time when gasoline prices in the U.S. have reached record highs. Most of the price increases have come in the wake of Russia's invasion of Ukraine and the economic recovery following the COVID-19 lockdown.
Looking ahead, DeHaan said the possibility of the Federal Reserve announcing an interest rate cut next week is another unknown variable that could lead to a further drop in gasoline prices or a return to higher prices.
“It depends on what signal the cut sends. A 50 basis point cut would be a warning sign about the economy and could depress oil prices, whereas a 25 basis point cut would send a more optimistic message and could support oil prices,” he said. “So it depends on the details of the size of the cut.”
Kloza said he expects gas prices to continue to fall, adding that gas prices shouldn't be a big issue come November.
“We'll definitely see prices below $3 in the U.S. by November,” he said, but noted that the West Coast is still a hot spot with slightly higher prices.
