When will gas prices go down? Are we headed towards more pain at the pump or is there an end in sight for drivers and companies?
Anyone with a car, or really anyone with eyes or ears has tuned into the gas price situation over the last many months. It’s been a growing problem in the United States and worldwide with a number of different factors contributing to the pain at the pump. In fact, gas prices have increased so much in the short term that it’s forced many to reconfigure summer travel plans, augment daily commutes, or just opt to stay home in an effort to keep money from flowing out of wallets and checking accounts. It’s also led many to (rightfully) wonder when will gas prices go down.
It’s not an easy question to answer and there are a number of different factors in play with this situation. When will gas prices go down might not have a definite date, but there are things we can look at to help determine if there is relief on the horizon or if we’ll be stuck in this situation for the long haul.
Let’s take a look at when gas prices will go down and what are things to be on the lookout to know how this particular petrol market it shaking out.
How Have Gas Prices Changed?
To see why, among the many reasons, folks have become so enamored around when will gas prices go down, it’s instructive to see how things have changed over the last couple of years. For starters, go back to April 2020 (via YCharts) when the pandemic was basically just starting and lockdowns were becoming a thing. With so many folks now off the roads, gas prices fell to the lowest point in more than 10 years at $1.88 per gallon. That was an anomaly based on the unprecedented circumstances at the time and prices had actually been hovering at about $2.60 and $2.70 per gallon in the run-up to the Spring of 2020.
After that, throughout the course of 2020 and the entirety of 2021 gas prices saw a steady climb upward, reaching right around $3.70 per gallon on February 28, 2022. And it’s right after this that things start to get a bit weird. Over the next two weeks, gas prices climbed to $4.41 per gallon an increase of over just about 20% in that span. It’s a massive spike, timed with the Russian invasion of Ukraine which sent markets into something of a panic mode because of the former country’s heavy exporting of oil.
That early-March spike in gas prices wasn’t the end of it either. Prices peaked on June 13th at $5.10 per gallon, a total of about a 270% increase since April 2020. Again, were there mitigating and extenuating circumstances here? Of course. These are unprecedented times indeed. But it speaks to just how crazy a price difference we’ve seen for gas over a relatively short period of time.
So, when will gas prices go down? Well, as compared to the aforementioned peaks, that has started to happen somewhat, but not fully, in the short term. As of this writing, gas was sitting at about $4.15 per gallon.
Why Are Prices So High?
When will gas prices ever go down does have quite a bit to do with the aforementioned conflict between Russia and Ukraine that’s still waging? According to Investopedia, in 2021 Russia was among the world’s top oil producers, accounting for roughly 11% of the global supply of crude. They were effectively tied with Saudi Arabia at 11% and the United States came in tops on the list at about 20% of the world’s supply of crude oil.
But though the United States produces a ton of crude oil, they also import a significant amount as well. This has to do with refineries turning crude oil into the petroleum needed to power automobiles and other vehicles. This refinery process happens at different locations and at different times during the year.
And whenever more than 10% of the world’s exported crude oil could be compromised because of a war, there are going to be fluctuations and that’s exactly what happened here.
Additionally, the timing of the Russian invasion of Ukraine came when prices, at least annually, tend to rise the most throughout the world. Traditionally, gas prices on a year-over-year basis increase leading into the summer heading into Memorial Day, climbing sometimes into August and then slowly tapering off around Labor Day. This coincides with a summer travel schedule that lessens when schools are back in session in the fall. Is it exact science for gas prices to work this way? No, but historically this has played out like this.
We’ve seen this play out over the course of these months. Gas prices are now down to $4.15 per gallon, down around 20% from the peak. This has been basically a straight-line graph down since that point with expectations that it will continue through Labor Day and maybe beyond.
When Will Gas Prices Go Down To The Same As Before?
While we are seeing gas prices falling because of lessened demand, suspension of gasoline taxes by some places, and negatively impacted drivers just choosing to stay out of cars, one shouldn’t begin thinking that we will see prices drop to those pandemic levels, or even the ones before. Remember, that even with the gas prices coming down since the peak, we are still up more than 20% since before the pandemic.
And then there is inflation to consider. In the short term, inflation will cause gas prices to stay on the higher side because the two numbers are definitely tied together. And honestly, inflation is tied to oil prices directly seeing as how the cost to produce goods and ship them is tied, in many cases, to the price of oil. If the price of oil goes up, then inflation sometimes isn’t too far behind.
And if we are headed into a recession because of all of this, with the broader economy hurting in the short and long term then we could see gas prices going down as well. Fear of this could have investors panicking some, driving down the price of oil and gas as well seeing as how demand could lessen if the economy is worsening.
In all, it doesn’t look like we are going to see another gas price spike as we did in February of this past year, but it doesn’t look like prices will fall all the way either. We could be in for a timeline of continued high prices in the coming months even if it’s not in the $5.00+ range we saw before.