US gasoline prices have fallen steadily since reaching an all-time high in mid-June, a welcome development for President Joe Biden that has been attributed to slowing US demand and recession fears.
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The price of regular gasoline has been on a 35-day streak of declines since hitting an all-time high of $5.01 a gallon (3.78 liters) on June 14, which equates to $1.32 a liter, according to the AAA in sequence organization.
“I feel better,” responded Rigobert Fokoua, who was filling up at a gas station in Rockville, Maryland. “My tank went from $80 to $60. »
For Confluence Investment’s Bill O’Grady, “Oil prices have clearly come down, taking fuel prices with them.”
Above $120 In early June, the price of a barrel of West Texas Intermediate (WTI), the benchmark for the American market, fell to $95 in mid-July before edging up slightly this week.
This slowdown stems from fears of a sudden economic slowdown or even recession, which would reduce global demand for crude oil but also for refined products, including gasoline.
This fear is largely related to the significant tightening of monetary policy, with sharp rate hikes by central banks, particularly the US Federal Reserve (Fed), recalls John Kilduff of Again Capital.
In the United States, the slowdown in gasoline demand is already being felt. It fell to its lowest level since the start of the year in the week ended July 8.
“It’s a big development,” says Bill O’Grady, “because we were expecting a very big summer season” on the roads, boosted by Americans’ appetite for driving after two years cut short by the coronavirus pandemic.
“Air” for consumers
“I tell myself that demand is falling because consumers are going out less because of high prices,” which are more than 40% higher than last year’s levels, says Brendan Anderson, walking through Rockville Station.
But historically, the rise in gas prices has had only a marginal impact on demand, recalls Bill O’Grady, who sees another possible explanation: the telecommuting revolution.
If telework is now possible, “when the price of gas goes up, you only go to the office twice a week instead of five days,” he argues.
“I assume that prices will continue to fall until the autumn,” says John Kilduff.
The White House on Monday hailed the drop in gasoline prices, which is seen as a strong psychological indicator for Americans, a drop that is giving consumers “breathing room”.
Joe Biden is being blamed by Republicans and part of public opinion for the surge in inflation that could weaken Democrats in the November 8 general election.
In a memo, White House Communications Director Kate Bedingfield highlighted “the historic actions” President Biden has taken to bring down oil and fuel prices.
This is largely the decision to tap into an unprecedented amount of US strategic oil reserves, which are down 136 million barrels since last September.
“The Biden administration is doing the right thing (…) by putting oil on the market,” said attorney Lyle Farmer, who was just filling up at the Rockville gas station.
“There are two ways to address the problem,” says Bill O’Grady. “First is to increase supply and second to reduce demand. (Biden) has done very little to increase supply and much to increase demand” with its strong economic support measures.
For Oanda’s Edward Moya, the recent surge in oil prices is even partly his fault, “after President Biden’s trip to the Middle East resulted in no commitment” from the Saudis to increase production.
Supply remains limited, mainly due to the sanctions imposed on Ukraine.
Crude oil prices rose again on Tuesday, partly because “the market is concerned” that the US president “will announce climate action” on Wednesday, said Price Futures Group’s Phil Flynn.
After Joe Biden admitted that it would be impossible for the environmental component of his program to be approved by Congress, Joe Biden intends to proceed through presidential decrees.
In order to calm the price of black gold, his government is currently trying to cap the price of exported Russian oil.
This project, which has received G7 approval in principle but has not yet been detailed, should allow Russian oil supplies to continue while Russia is deprived of most of the profits derived from them.