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Gas Prices Finally Dipped Below $5. But Don't Expect Them to Stay There

Analysts predict motorists could soon be paying more than $6 a gallon.

A man in a cream-colored beanie pumps gas into a van.
The national average for a gallon of gas finally dropped below $5 over the weekend.
Kentaroo Tryman/Getty Images

The average price of gas has gone down, after spending the better part of a week at or above $5 a gallon. On Sunday, the national average dipped to $4.98 a gallon and stayed there on Monday, according to data from AAA.

Part of that is due to demand destruction, when the price of fuel is so high motorists rethink filling up their tanks. According to AAA, gasoline demand declined slightly last week from 9.2 million barrels a day to 9.09 million, helping to limit prices.

"However, as crude oil prices remain volatile, the price per gallon for gasoline will likely remain elevated," the organization said in a statement Friday.

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Crude oil prices, which are now nearly $115 a barrel, account for 60% of the price of regular unleaded gasoline. The cost of crude could reach $150 a barrel by the end of September, Foreign Policy reported in June.

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.

Here's what you need to know about gasoline prices, including how high they could go, what the White House is doing to turn that around and how you can save money when you fill up.

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

Los Angeles County saw the average price of self-serve regular gasoline pass $6 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." 

President Joe Biden has also accused oil companies of profiteering off the crisis.

"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 will 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.  

"This dynamic between decreased supply and increased demand is contributing to rising prices at the pump," AAA said in a June 13 statement. "Coupled with increasing crude oil prices, this means that the price of gas will likely remain elevated for the near future."

gas prices

Analysts predict gas in the US could soar to $7 a gallon.

Getty Images

With expectations of strong driving demand through Labor Day, Hirs said the price of gas will top $6 by September, thanks to shrinking US refining capacity and increased demand for domestic oil in foreign markets.

Natasha Kaneva, JPMorgan'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

What is the government doing to lower gas prices? 

In the June 15 letter, Biden 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 fuel that contains 15% corn ethanol. The impact will be modest, as only about 2,500 of the more than 100,000 gas stations nationwide sell the higher-ethanol biofuel.

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.

The chief executive of Texas oil company Pioneer Natural Resources, Scott Sheffield, told The New York Times in March: "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."

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.

Individually, Connecticut, Maryland, New York, Florida and Georgia have suspended state gas taxes to help consumers, and at least 20 other states are considering similar moves. 

There's also a bill in Congress that would pause the federal fuel tax, though it faces stiff opposition. Biden said he hopes to decide on whether to support a federal gasoline tax holiday by the end of the week. The president can't declare a holiday unilaterally, but he could pressure lawmakers to pass the measure. 

How can drivers save at the gas station?

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."