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Gas Prices Continue to Fall as Oil Dips Under $100 a Barrel. What It All Means

A small stack of money with a thin red rope around it.
After reaching a record high in mid-June, gas prices have cooled down lately.
Sarah Tew/CNET

What's happening

Gas prices have continued to decline since reaching an all-time average high of $5.02 in mid-June.

Why it matters

The price of gas is still $1.67 more a gallon than a year ago, and many motorists are feeling the pinch.

After hitting a record high of $5.02 on June 14, the price of gas has cooled over the past three weeks. On Tuesday, the national average price per gallon was $4.80, according to AAA. While the decrease is a welcome change for drivers, gas prices are still almost $2 more than last year.

On Saturday, President Joe Biden sent a strongly worded tweet directed at the "companies running gas stations." 

In May, the House of Representatives passed a bill designed to counter gas price gouging, but the Senate has not acted on it yet.

The price of oil also plunged below $100 a barrel on Tuesday, indicating investor concerns about an economic recession and what's called "demand destruction" -- aka motorists buying less gas because of high prices. However, "July is typically the heaviest month for demand as more Americans hit the road, so this trend of easing prices could be short-lived," according to AAA spokesperson Andrew Gross.

Here's what you need to know about gasoline prices, including how high they could go, what states are considering to check gas prices and how you can save money when you fill up your tank. For more ways you might get more money in your pocket, here are states looking at child tax credits and stimulus money in the form of tax rebates and inflation-relief checks.

What states have seen the biggest decrease in gas prices?

Over the past week, the states with the biggest drop in gas prices were Texas (-13 cents), Delaware (-13 cents), Arizona (-12 cents), Illinois (-12 cents), Indiana (-12 cents), Ohio (-12 cents), South Carolina (-11 cents), Florida (-11 cents), Virginia (-11 cents) and Maryland (-10 cents), according to AAA.

South Carolina's latest average of $4.29 a gallon makes it the state with the cheapest gas in the country. Georgia comes in second at $4.30.

Among the states with the biggest price decreases, Maryland is the only one that paused its state gas tax during this period. Florida's one-month fuel-tax holiday, which will lower the price of gas by 25.3 cents a gallon, won't take effect until Oct. 1.

You can see the average price of gas in all 50 states and the District of Columbia on the AAA Gas Prices website.

Why is gas so expensive?

Russia's ongoing invasion of Ukraine is one obvious factor. The price of gas is inextricably linked to the cost of crude oil, from which it's refined. Every $10 increase in the cost of a barrel of crude adds almost 25 cents to the price of a gallon of gas.

According to the White House, the war has raised gasoline prices by more than $1.70 per gallon.

Even though the US doesn't import much crude from Russia, oil is traded on a global market and any change affects prices all over the world. 

Gas prices on a sign at a station in Los Angeles country, with a car and a bus in the background

The average price of gasoline in California has hit $6.30 a gallon.

Zeng Hui/Getty Images

Crude oil prices could reach $150 a barrel by fall, Foreign Policy reported. And, according to new data from the Energy Information Administration, the total domestic supply of gasoline is falling: The week of July 13 it dropped 700,000 barrels to 217.5 trillion.

But the Russian invasion isn't the only factor: Even though demand is nearing pre-pandemic levels, producers are still gun-shy about increasing production. In April, OPEC fell short of its targeted production increase by 2.7 million barrels a day.

"We've had a supply-and-demand imbalance for a while," Troy Vincent, a senior market analyst at energy analysis firm DTN, told CNET. "And it will remain, regardless of whether this conflict goes away." 

Biden has also accused oil companies of profiteering.

"Amid a war that has raised gasoline prices more than $1.70 per gallon, historically high refinery profit margins are worsening that pain," Biden wrote in a June 15 letter to heads of Exxon Mobil, Chevron, Shell, Phillips 66, BP and other companies. 

"I understand that many factors contributed to the business decisions to reduce refinery capacity, which occurred before I took office," he added. "But at a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable."

In addition, in the summer months, gasoline is reformulated to prevent excess evaporation caused by higher temperatures outside. The more expensive summer blend of gasoline can add between 7 and 10 cents per gallon.

How high could gas prices go?

The week of June 13, gas hit an average of $5.02 a gallon -- a record dollar amount but, adjusted for inflation, still below the 2008 peak of $4.14, which would be about $5.37 now. Still, experts don't believe we've seen the end of rising gas prices.

Analysts predict prices at the pump will go up again. According to Ed Hirs, an economist at the University of Houston, the national average will likely hit $6 a gallon by Labor Day.

Natasha Kaneva, J.P. Morgan's head of commodities research, is even more pessimistic: In a May report, Kaneva said the price could jump to $6.20 a gallon as early as August, Insider reported

gas prices

Analysts predict gas in the US could surpass $6 a gallon nationwide by fall.

Getty Images

What is the government doing to lower gas prices? 

In June, Biden endorsed a three-month nationwide gas tax holiday. Individually, Connecticut, Maryland, New York, Florida and Georgia have already suspended state gas taxes, and at least 20 other states are considering similar moves. 

In the June 15 letter, the president called on oil companies to work with his administration to address any reductions in production as well as "inventory, price, and refining capacity issues." 

He previously criticized them for sitting on over 12 million acres of federal land approved for drilling and 9,000 production permits. The administration has indicated it wants oil companies to pay fines for letting leases go unused.

In April, the Environmental Protection Agency approved year-round sales of E15 gasoline, a cheaper, higher-ethanol fuel. The impact will be modest, as only about 2,500 of the more than 100,000 gas stations nationwide sell the blend.

In March, the White House began releasing a million barrels of oil a day from the US Strategic Petroleum Reserve. The unprecedented withdrawal, expected to last for six months, could lower gasoline prices between 10 and 35 cents a gallon.

"It will lower the oil price a little and encourage more demand. But it is still a Band-Aid on a significant shortfall of supply," Scott Sheffield, chief executive of Texas oil company Pioneer Natural Resources, told The New York Times.

The US is also looking at getting energy products from other sources: The Biden administration has been improving diplomatic relations with Venezuela, which has been banned from selling oil to the US since 2018 and is negotiating another nuclear nonproliferation treaty with Iran, which could bring Iranian oil back onto the market.

How can drivers save at the pump?

Drivers can cut down on nonessential trips and shop around for the best price, even crossing state lines if convenient. 

Apps like Gas Guru scan for the best gas prices in your region. Others, like FuelLog, track your car's gas mileage and can help determine if it's getting decent fuel economy. In addition, many gas station chains have loyalty programs, and credit cards have rewards programs that give cash back for gas purchases.

DTN's Vincent advises against hoarding gas or other extreme measures but encourages budgeting more for gas. High energy prices have been a major contributor to inflation for a while, he said, and won't be going away immediately. 

"When the cost of crude rises, prices at the pump tend to reflect it very quickly," he said. "But gas prices tend to linger higher longer even when crude falls."