4 Reasons Why Gas Prices Will Drop by September

  • Four factors will probably push down gasoline prices by September.
  • Among the most important of these reasons are the approaching end of the summer driving season and the likely success of President Joe Biden’s trip to Saudi Arabia.
  • Two other factors likely to push down gas prices are “demand destruction” in America and a likely end to the Russian-Ukrainian War.
A person holding a gas pump looks at gas prices with an expression of shock.

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For many months, Americans have been asking, “When will gas prices go down?” We sort of have an answer now. That’s because, West Texas Intermediate oil prices have already dropped about 10% since the middle of June, triggering a slight decline in gas prices. But, for several reasons, I think WTI oil will fall significantly further by September, resulting in a further, meaningful decrease in Americans’ pain at the pump.

The most important of these reasons are the approaching end of the summer driving season, the likely success of President Joe Biden’s trip to Saudi Arabia, “demand destruction” in America and a likely end to the Russian-Ukrainian War.

Let’s take a closer look at each of these factors.

The End of the Summer Driving Season

This factor is very straightforward. Each year, as long as lockdowns have not been imposed Americans tend to travel much more during the summer when their children are off from school and the weather is warm throughout the country and in Europe.

By August, oil traders will likely start pricing in the reduced demand that occurs after the summer driving season is over, causing a decline in oil and gasoline prices.

The Likely Success of President Biden’s Trip to Saudi Arabia

Biden is slated to visit Saudi Arabia in the second full week of July. U.S. presidents who are seeking concessions from foreign leaders rarely meet with them unless a deal is at least somewhat close.

Put another way, American presidents usually do not meet with their foreign counterparts unless there’s a very good chance of reaching a deal. I believe that’s partly because the president’s handlers do not want to waste his time and partly because a meeting with the U.S. president is seen as an award in and of itself. As a result, that prize is usually not given to foreign leaders unless they’ve already made significant concessions to the American administration.

Moreover, it appears that the U.S. and Saudi Arabia can easily help each other without sacrificing any of their important interests. Saudi Arabia can meaningfully increase the amount of oil that it’s pumping without sacrificing its need for relatively high oil prices, while the U.S. can sell more weapons to Saudi Arabia and do more to protect it from Iran without sacrificing any of America’s core interests.

Demand Destruction in America

With the advent of electric vehicles, Americans have a means of reducing their gasoline demand that wasn’t available during past gasoline price hikes.

Additionally, unlike in the 1970s, tens of millions of Americans drive SUVs and pickups. As a result, hundreds of thousands of them can choose to trade their huge, gas guzzling vehicles for much smaller ones or drive their larger vehicles less and their smaller vehicles more.

Unsurprisingly, demand destruction has already occurred, with Houston oil consultant Andrew Lipow recently telling Reuters that “we see the high prices resulting in some demand destruction.”

A Likely End to the Russia-Ukrainian War

More Western leaders and experts are calling for Ukraine to end the war by making concessions to Moscow. For example, the head of NATO, Jens Stoltenberg, recently indicated that Ukraine would have to make territorial concessions to Russia, echoing a sentiment expressed more directly by former U.S. Secretary of State Henry Kissinger. And in early June, French President Emmanuel Macron said that Western nations should not seek to “humiliate” Russian President Vladimir Putin.

These statements suggest that the West is ready to push Ukraine to make concessions to Moscow. In all likelihood, those concessions would end the war, since Russia is losing a great deal of money due to the conflict and consequently will likely agree to terminate it, as long as it obtains some concessions from Ukraine.

When the war ends, Russia will probably be able to export oil to more countries, pushing down oil and gas prices.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.

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