Average U.S. gasoline prices have fallen to $4.03 per gallon, according to AAA. For Houston, the average price has dropped considerably lower to $3.56 per gallon, its lowest level since February, according to the Energy Information Administration.
Several factors have combined to reduce prices. Part of the price decline is seasonal. "Prices tend to fall starting about mid-summer anyway," said Michelle Foss, fellow in energy, minerals, and materials at Rice University's Baker Institute.
"As we head into the summer driving season, in particular, you'll see prices firm up as the refiners and traders look at prospects for increased demand. And then, as we head out of the summer driving season, you'll see prices fall as people start to think that gasoline demand will drop.”
In addition, falling crude oil prices are working their way through to consumers. The West Texas Intermediate price of a barrel of oil – the U.S. standard – fell to $96.59 last week, down from a high of $121.94 at the beginning of June.
"It's a fairly standard relationship," Foss said. "Whatever you pay per barrel of oil plus a dollar and change to push it through a refinery is what you'll see at the gasoline pump."
A third factor is that the high gasoline prices of this spring and early summer have caused people to drive less, and that lower demand has helped to pull prices down.
Debnil Chowdhury, head of Americas refining at S&P Global Commodity Insights, said there's evidence that gasoline demand is lower today than in early August 2021.
"There was a debate on whether or not the higher prices that we saw from the March to July timeframe would actually impact demand," Chowdhury said. "There was a lot of people on the bull side of pricing that were saying that there was so much pent-up demand that consumers would not be price sensitive, and there were people on the bear side that were saying they would be price sensitive, and we are seeing that the bears are winning. There is an impact on demand due to the pricing."
All other things being equal, prices could continue falling for the rest of the year. But Chowdhury warns there is a potential wildcard that could send them soaring again.
"We are approaching the peak of hurricane season," Chowdhury said. "So, if a hurricane hits, we could see the world worried about U.S. crude exports to the rest of the world declining and what that would do to crude pricing. It would also cause worries on the East Coast on U.S. Gulf Coast refining capacity, and you would see an increase in price again.