US gasoline prices are now cheaper than they were one year ago, providing relief to Americans that have spent 2022 grappling with the worst inflation in decades.
The average cost of a regular gallon of gas in the United States is now $3.33, according to AAA. One year ago, it was $3.34.
Gas prices peaked just above $5 a gallon in June, hitting a record high. Since then, they’ve fallen sharply as an economic slowdown and concerns about a global recession have helped ease demand for oil around the world. Average US prices have dropped by 14 cents over the past week and 47 cents over the past month.
“Gasoline deflation is alive and well,” Patrick De Haan, head of petroleum analysis at GasBuddy, tweeted on Wednesday, noting the quick comedown in gas prices in California, where prices have been particularly steep.
Falling energy prices could continue to help ease consumer inflation. The US consumer price index in October registered its lowest annual reading since January. Data for November arrives next week.
Energy analysts had been worried that Europe’s embargo on oil shipped by sea from Russia and the West’s new price cap on Russian crude could inject volatility back into the market. But so far, oil prices have continued their descent.
Both Brent crude futures, the global benchmark, and West Texas Intermediate futures, the go-to for US prices, have dropped almost 10% so far this week, hitting their lowest levels of the year.
Sources of uncertainty remain, however. The Organization of the Petroleum Exporting Countries, or OPEC, decided on Sunday to stick with its existing plan for production cuts equivalent to about 2% of global demand through 2023. If the group opts to place even harsher limits on output, that could drive up prices again.
Russia’s war in Ukraine also continues to hang over the energy market, as does President Vladimir Putin’s response to Europe’s oil embargo and the new price cap. If Russia slashes production, a move that could reduce supply by more than a million barrels per day, that could also lift prices.
Plus, demand from China could rebound faster than expected as the country lifts coronavirus restrictions. Concerns about the economic impact of those restrictions have been a key reason oil prices have dropped in recent months.