Recession fears gripped oil markets this week, with WTI and Brent briefly slipping below $100. Since then, Brent has rebounded above the three-digit threshold while WTI has yet to recover. That raised hopes that gasoline prices could also fall further after the national average fell from a record low of more than $5 a gallon. However, there seems to be little hope of a significant drop at the pumps.
A tweet from President Biden over the July 4 weekend has gone viral for calling on gas station owners to lower prices.
“My message to companies that run gas stations and set prices at the pump is simple: We are in a time of war and global peril,” Biden wrote. “Reduce the price you charge at the pump to reflect the cost you pay for the product. And do it now,” Biden said. said.
The responses this tweet elicited were not all positive, with some telling Biden that’s not how the retail fuel industry works, others noting that gas station owners don’t win the day. enormous amount of money that Biden had suggested.
Even Amazon’s Jeff Bezos lashed out at the president, in effect accusing him of deliberately distracting attention or demonstrating “a profound misunderstanding of basic market dynamics.”
The exchange of tweets – which continued with White House press secretary Karine Jean-Pierre saying that oil prices fell $15 in June – was another sign that the price situation fuel in the United States was quite complicated. Analysts say this is likely to remain complicated as pre-election concerns also rise.
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Tamar Essner of Vectis Energy Partners, for example, this week Told Yahoo Finance will still take some time before the national average drops back below $4. For that to happen, Essner said, we would need to see demand destruction.
“While we may see prices lower this week, the decline could fade soon if oil prices reverse, especially with strong demand over the holidays,” GasBuddy’s Patrick De Haan said separately, also this week. week.
He did, however, sound a positive note, adding that “Americans are currently spending almost $100 million a day less on gasoline than when prices peaked a few weeks ago, and that’s a much-needed relief. at a time when gasoline prices remain near records.”
Essner, on the other hand, said prices would have to go up first before demand destruction materializes: “I think prices have to go up a bit to see demand destruction,” he said. she told Yahoo Finance. “I don’t know what that magic number is, because we’re in unprecedented times in terms of increased demand post-COVID at the same time due to stimulus and higher disposable income.”
Some believe that demand has already been destroyed. Rachel Ziemba, energy researcher, Told CNBC this week that “we’re starting to see some signs of demand destruction, especially for gasoline, but it’s really just off some of the highs of last year, when gasoline prices were much lower Dear”.
“All of these consumption metrics that we’re looking at are actually even higher now than they were this time in 2019, when gas prices were significantly cheaper, when many other goods were cheaper. And when the U.S. economy was also in a pretty robust state,” Ziemba added.
According to AAA, the average gasoline price in the United States on Wednesday was $4.779 per gallon. That was down from $4.865 a gallon a month ago and more than $0.20 down from the all-time high recorded in June.
Crude oil prices, meanwhile, fell to the lowest in 12 weeks earlier this week on worsening recession fears. The drop was boosted by the American Petroleum Institute’s estimate of crude oil inventories rising nearly 4 million barrels in the last week of June.
By Irina Slav for Oilprice.com
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