A gallon of unleaded gas on average dropped 4 cents in the week through Monday, reaching $3.35, the lowest price since Oct. 20, AAA said. Much of the slump resulted from a sharp decline in oil prices after omicron—the latest variant of the coronavirus—set off a wave of new restrictions around the globe that could crimp oil demand. Oil prices generally account for roughly half the price of retail gasoline. In addition, the Organization of the Petroleum Exporting Countries and non-member countries (OPEC+ for short) decided last week to maintain its production schedule instead of pausing it in the face of omicron, which some had speculated it would do. The price decline is likely a relief to the Biden administration, which has released oil from strategic reserves and urged OPEC and Russia to increase supply to quell price gains. OPEC+ left itself some wiggle room to reconsider production levels if omicron forces governments to take more drastic measures. But for now, consumers can expect gas prices to continue softening if nothing else changes. “We will see precipitous declines in the next week or two as stations continue to sell through higher priced inventory before slowly lowering their prices,” wrote Patrick De Haan, head of petroleum analysis at GasBuddy, in a report. “It’s not impossible given the conditions that price wars, where stations lower their price significantly, could emerge as stations now have considerable room to lower prices.” Andrew Gross, spokesman for AAA, was more cautious on the expected decline in gas prices, forecasting “gentle relief for the consumer” through the end of the year. However, he added, “If there is some sort of shock to the system—a major global event we don’t know about right now like another variant, a war or giant disaster or asteroid strike, I don’t know—oil prices will go up and that will be reflected at the pump.” Have a question, comment, or story to share? You can reach Medora at medoralee@thebalance.com.
