New York (CNN Business)After more than a month of rising prices, Tuesday brought modest – very modest – relief to drivers.
The average price of a gallon of regular gasoline fell to $4.32 a gallon Monday from $4.33 a gallon, according to the AAA. Even by just nine-tenths of a cent, it was the biggest single-day fall in gas prices since August 2021.
Naturally, gas prices remain historically high. Ahead of last week, the record high was $4.11 a gallon, a level first seen in 2008. Last week, gasoline set four straight records before prices remained virtually unchanged over the weekend and Monday.
The drop in retail gas prices follows a sharper drop in oil prices in Monday trading, when prices fell 8%. If oil prices stay at these levels, there could be more significant relief at the pump, perhaps as much as 20 cents a gallon, predicted Tom Kloza, global head of energy analysis at Oil Price Information Analysis, which tracks gasoline prices for AA. But it’s not surprising that the drop in gasoline prices has lagged behind the drop in oil prices.
“Gasoline prices can rise like a rocket and fall like a feather,” Kloza said.
Even if drivers get that 20 cents a gallon break at the pump, it probably won’t last.
U.S. demand for gasoline is likely to increase, especially given the record number of jobs last year and more workers who were working from home returning to the office.
Kloza said as the summer driving season approaches and the United States switches to a more expensive summer gasoline blend designed to combat smog and pollution, prices will likely rise to around $4.50 a gallon.
There are two factors that could limit the rise in oil and gas prices: one good and one bad.
The good thing would be peace in Ukraine, especially a peace that led to the lifting of sanctions on Russia by the United States and many other Western nations. Hopes for peace talks on Monday partly helped push oil prices down.
Russia is one of the largest oil exporters in the world. Although relatively little Russian oil reaches US customers, oil is valued in global commodity markets. So the disruption in oil flow had sent prices skyrocketing.
The bad news that could drive prices lower would be a new wave of Covid-19, which would force countries that had opened up to reintroduce restrictions on businesses and individuals. China imposed fresh lockdowns over the weekend amid a Covid surge. According to analysts, this was one of the factors behind Monday’s drop in oil prices.
The rise in gas prices so far this year has been historic, at times the steepest rate since Hurricane Katrina hit the US Gulf Coast in 2005, devastating oil rigs and refineries in the region. The average US price is up 78 cents, or 22%, since Feb. 23, the day before Russia invaded Ukraine.
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