Gas Prices Are Falling. How Low Will They Go in 2022?

  • The price of gasoline has declined for 24 straight days.
  • Consensus expert opinion implies that drivers should advantage relatively cheap gas prices now.
  • A minefield of potential headwinds is waiting to raise gas prices for the rest of 2022.
gas prices - Gas Prices Are Falling. How Low Will They Go in 2022?

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High gas prices have caused pain at the pump for millions of Americans. However, for the roughly 3.5-trailing-week period, gas prices have declined, leading embattled drivers to ask the obvious question: How low can they go in 2022?

For those with an exclusively near-term perspective, the answer could be an encouraging one. According to a Friday morning report from the Wall Street Journal, U.S. gas prices have fallen for 24 straight days. According to data from AAA, the national average as of July 8 stood at $4.72. A week ago, it was $4.84. A month ago, commuters were looking at just under $4.96.

Why the erosion in gas prices when previously, they seemed hellbent on soaring to the moon? According to AAA, the cost escalation finally caught up with the consumer economy, resulting in diminished demand at the pump. Further, increasing supply of natural gas combined with lower crude oil indices contributed to the declines.

As well, the WSJ added that gas sales “leading up to Independence Day trailed previous years. Same-store gasoline demand by volume fell about 7% for the week ending July 2, compared with the same period last year.” Under one optimistic forecast, West Texas Intermediate could dip to below $90 per barrel this autumn.

Nevertheless, drivers may want to take advantage of the low gas prices now. Looking ahead toward the end of 2022, analysts have a rather pessimistic view.

Putin and Summer Travel Loom Over Gas Prices

One of the obvious catalysts for higher gas prices erupted earlier this year, when Russia invaded Ukraine. With Western powers currently in a standoff with Moscow, a significant amount of global energy supply is effectively shelved.

Beyond that point, households must contend with the busy summer travel season. With cancelled flights rapidly becoming the new normal, millions of vacationers may switch their mode of transportation to the automotive variety, irrespective of cost considerations. In addition, the concept of revenge travel might increase overall traffic, which would not help cool gas prices.

Finally, a major factor in the mitigation of pain at the pump stemmed from the release of oil from the U.S. Strategic Petroleum Reserve. However, Fernando C. Hernandez, a technology specialist in energy and the principal at Hernandez Analytica, warned that if SPR levels fall too low while hurricane season is in full swing, multiple industries could be disrupted for up to two business quarters.

A Possible Easing in 2023

Though circumstances don’t appear favorable for 2022, next year could provide some relief. According to energy research and consultancy firm Wood Mackenzie, crude prices may average around $100 per barrel in 2023, which compares favorably to $110 for the year so far. If so, that could provide some sustained relief in terms of gas prices.

Still, one final development to consider is the grand work-from-home experiment. Currently, vehicle miles traveled are now back up to pre-pandemic norms. However, if more companies demand their workers return to the office, this metric could spike if they can’t find remote replacement jobs. Ultimately, it’s probably best not to get too comfortable regarding the prospect of lower gas prices.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


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