Gasoline prices in the United States have been falling since a historic peak in mid-June, a welcome phenomenon for President Joe Biden, attributed to the slowdown in American demand as well as fears of recession.
Since hitting an all-time high of $5.01 per gallon (3.78 liters) on June 14, the equivalent of $1.32 per liter, the price of regular gasoline remains on a 35-day streak of declines in a row, according to data from the AAA organization.
For Bill O’Grady, of Confluence Investment, “oil prices have clearly come down, and have taken fuel prices with them”.
Above 120 dollars at the beginning of June, the price of a barrel of West Texas Intermediate (WTI), the benchmark for the American market, fell in mid-July to 95 dollars, before rising slightly this week.
This cooling is due to the fear of a sudden deceleration of the economy, or even a recession, which would contract the world demand for crude oil, but also for refined products, including gasoline.
This apprehension is largely linked to the marked tightening of monetary policies, with sharp rate hikes by central banks, in particular the Federal Reserve (Fed), recalls John Kilduff, of Again Capital.
In the United States, the slowdown in gasoline demand is already palpable. It fell, during the week ended July 8, to its lowest level since the beginning of the year.
“It’s a major development”, underlines Bill O’Grady, “because we expected a very big summer season” on the roads, boosted by the appetite of Americans for driving, after two years truncated by the coronavirus pandemic.
– “Air” for consumers –
Historically, the increase in the price of gasoline has only a marginal effect on demand, recalls the analyst, who sees another possible explanation: the telecommuting revolution.
If remote work is now possible, “when the price of gasoline goes up, instead of going to the office five days, you will only go twice” in the week, he argues.
“I expect prices to continue to fall until the autumn included”, explains John Kilduff.
The White House on Monday welcomed the drop in gasoline prices, considered a strong psychological indicator for Americans, a decline that gives “air” to consumers.
Joe Biden is held responsible by the Republicans and part of public opinion for the surge in inflation, which could weaken the Democrats during the legislative election on November 8.
In a memo, White House communications director Kate Bedingfield highlighted “the historic actions” taken by President Biden to ease oil and fuel prices.
This is mainly the decision to use an unprecedented amount of US strategic oil reserves, which have decreased by 136 million barrels since last September.
“There are two ways to respond to the problem,” tempers Bill O’Grady. “The first is to increase supply and the second is to reduce demand. It has done very little to increase supply and a lot to increase demand” with its strong measures to support the economy.
For Edward Moya, of Oanda, the recent rise in oil prices is even partly attributable to him, “after President Biden’s trip to the Middle East did not result in any commitment” from the Saudis to increase their production.
Supply remains constrained, mainly due to the sanctions imposed on Ukraine.
The Biden government is currently seeking to put in place a cap on the price of exported Russian oil.
This project, which has received, in principle, the approval of the G7 but has not yet been detailed, must limit the disruption of world supplies while depriving Russia of most of the profits it derives from black gold.
On Tuesday, Treasury Secretary Janet Yellen warned on public radio NPR that if this mechanism is not put in place, the price of a barrel could rise to 140 dollars.