For the first time in months, the average price of regular gasoline in the U.S. has dropped below $4 a gallon, reaching $3.94 nationwide, according to AAA. Prices have fallen about 40 cents over the past month due to seasonal shifts, refinery changes, and declining crude oil costs.
Gasoline Prices Fall Below $4 Due to Seasonal Shifts
Drivers are starting to see relief from high fuel prices as the national average for a gallon of regular gasoline crossed below the $4 threshold on Tuesday, NPR reported. Over the last month, costs have dropped by roughly 40 cents, with the majority of that reduction taking place during the past fortnight.
Many people assume politics or elections are driving the change, but industry experts say the drop is due to routine seasonal shifts. Patrick De Haan, head of petroleum analysis at GasBuddy, wrote in his industry newsletter that gasoline prices are dropping for a more banal reason: “For now, it’s the seasonal shift, not politics, driving the relief at the pump.”
Gas prices typically ease in the fall because warmer summer months represent peak driving season. With cooler weather arriving, fewer people drive, leaving slightly more gasoline on the market, AAA pointed out. Refineries also finish their annual maintenance by late fall, which adds additional fuel supply.
The chemical blend of gasoline changes during this period. Refineries produce two types of gasoline annually: summer and winter blends. The summer blend produces less smog because it evaporates less quickly in the heat. The winter blend helps engines start up in freezing weather and incorporates a bit more butane, which helps lower its cost.
Normally, that seasonal switch happens around September 15. However, the Environmental Protection Agency and the Department of Energy announced that the switch would happen early on September 1, citing gasoline prices driven up by the war in Iran.
Crude Oil Decline and Seasonal Demand Drive Lower Prices
- Crude Oil Decline: The primary driver of lower pump prices is the falling cost of Brent crude oil, which refineries need to make gasoline, diesel, and jet fuel.
- Supply Chain Realities: Reaching pre-conflict price levels will require a full recovery of global crude production, shipping, and refining supply chains.
- Seasonal Demand: Lower driving rates in cooler weather and cheaper winter-blend fuel formulations contribute directly to falling prices.
Falling Brent Crude Oil Prices Reflect Middle East Supply Changes
Seasonal factors alone do not account for the entirety of the price drop, according to Jorge León, head of geopolitics at the research group Rystad Energy. The main driver is the falling price of Brent crude oil, which has dropped to about $90 a barrel.
That price is falling because slightly more oil is emerging from the Middle East via pipelines. Market traders have also reacted positively to intensifying diplomatic efforts between the U.S. and Iran.
However, that progress could easily reverse if the conflict escalates, León communicated via an electronic message to NPR. "President Trump may see further military action as a way to regain negotiating power before Democrats take control of Congress in January." If we see renewed escalation, much of last week’s oil price decline could quickly reverse,” he wrote.”
Congressional Democrats have expressed support for ending the war in Iran. While their direct power to stop the conflict is limited, they control the power of the purse and can withhold additional war funding or delay confirmations of key officials.
Supply Chain Recovery and Future Price Outlook
If the price of Brent crude continues to fall, prices at the pump could follow suit. Even so, industry analysts warn consumers not to expect a complete return to pre-conflict prices immediately.
“However, this does not mean a complete ‘normalization,’ a return to the price levels we had before this conflict started,” Jaime Brito, who serves as the executive director of refining and oil markets for Dow Jones Energy, transmitted in an email message to NPR.
To return to pre-Iran war gas prices, the entire global oil supply chain must recover. Ships currently running long alternative routes to avoid the Strait of Hormuz would need to return to their points of origin and resume normal routes delivering crude oil to refineries.
Those refineries would then need to pump out enough fuel to alleviate global demand and depleted stockpiles, a process that could take months after a lasting peace deal.
“Coming back to those levels will require a return to normal crude production, shipping and refining of the entire global supply chain,” Brito said.
References
- AAA National Gas Prices Report
