Will gasoline prices ever go down?

As it becomes more and more painful to fill up the gas tank, you may be wondering: will gas prices ever come down?

Fuel prices feel like they’ve been on a never-ending ride higher lately. A year ago, the national average price for regular unleaded gasoline was $2.96 per gallon, according to travel website AAA. A month ago, it was $4.12. Today, it is $4.33. And it will probably go even higher this spring.

We recently looked at the reasons why gas prices are so high: Global oil demand is recovering from the pandemic faster than production. The war in Ukraine. Efforts in the US to wean the economy off fossil fuels. The reluctance of energy companies to invest in more oil production.

Now, let’s try to answer the question that is undoubtedly on the minds of many drivers: will gas prices drop soon, and if so, what will drive them?

Fuel tax relief?

Some states have tried to ease the financial burden on their residents by suspending their state fuel taxes for a short time. But are gasoline prices going down because of those moves?

Not really.

For example, Connecticut suspended its state tax of 25 cents per gallon on fuel for April, May and June. But according to AAA, the average price for regular unleaded gasoline in the Nutmeg State today is $4.32, up from $4.13 a week ago. Increases in crude oil prices can negate the effect of suspending a state’s gas tax. And when those state taxes are suspended, the savings don’t all go into the driver’s pocket. The fuel sellers keep a part of them.

Could the federal government give drivers across the country a tax break by suspending the federal gas tax of 18.3 cents per gallon? Unlikely, please inform my colleagues at Kiplinger’s letterwho regularly speaks with lawmakers on Capitol Hill to assess which bills have a chance of passing.

In the case of a proposed suspension of the federal gas tax, the Democrats, the majority party, cannot agree among themselves to do so.

More oil on the way

Here’s a bit of good news: More crude oil should hit the world market later this year, which means more gasoline and other refined fuels. Eventually, that should help bring down gas prices, or at least keep them from rising as fast.

In the US, energy companies are slowly putting more rigs to work drilling new wells, even as they prioritize returning cash to investors through share buybacks and dividends. Oil services company Baker Hughes reports the number of rigs in operation in the US each week, and lately, most weeks, the tally has increased a bit. Meanwhile, OPEC announced last week that it will continue with its plan to gradually restore oil exports it cut in 2020 when prices plummeted, adding some 400,000 barrels of daily exports each month.

The bad news: Neither domestic oil production nor OPEC sales are rising fast enough to push oil prices down now. And that means gas prices are unlikely to catch a breath any time soon.

So when can we expect gas prices to drop?

Gas prices could drop in the fall

A good bet for when gas prices drop is in the fall, if seasonal patterns hold this year.

Before COVID-19 disrupted those patterns, gas prices typically rose in the spring, peaked sometime around Memorial Day, dipped a bit but remained high through the summer, and then eased back in the summer. sometime after Labor Day.

As post-pandemic life returns to normal, that pattern could return this year. Busy summer travel and the resulting high demand for gasoline is likely to subside in late summer or early fall when kids head back to school. By then, the Fed’s interest rate increases will have had time to slow the broader economy, which should also weigh on oil demand. OPEC should be pumping more oil then, as should the US, continuing the slow rebound in output from the pandemic-induced slump.

That may not be much comfort to motorists as they pay for expensive refueling this spring and summer. But unless an economic downturn hits soon and hits fuel demand painfully, high gas prices aren’t likely to go down any time soon.

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