The latest update from the U.S. Energy Information Administration (EIA) showed that the average price for a gallon of Regular gasoline in America fell by six cents last week to $4.17 per gallon, the 3rd weekly decrease in a row.
Regionally the cheapest gas in the country, as of this writing, can be found in Oklahoma, where a gallon of Regular costs “just” $3.69/gallon on average, whereas Californians continue to pay the most at the pump in the continental U.S. ($5.83/gallon).
Although a 3-week decline is a welcome reversal of recent trend, by itself it is likely to provide little relief for commuters considering that it followed an 11-week rise where the price per gallon jumped by 32 percent. Moreover, on average the typical American is currently still paying around 46 percent more at the pump than they did a year ago, and 5 percent more than during the previous all-time high hit during the “Great Recession.” The initial move higher started due to the rebound in highway traffic as pandemic-related restrictions started to be lifted and more people returned to their daily work commute and/or felt confident enough to venture out recreationally more frequently.
Policy decisions that disincentivized domestic oil production and caused America to lose its energy independence exacerbated supply and demand balances, and problems were further complicated after the latest geopolitical events in Ukraine. Several foreign oil producing countries currently have additional capacity they could turn to and help boost production, and several have already expressed a desire to start doing so, but it will still take time for this additional output to come online, and even more time for the potential cost-lowering impact to filter through all the way to consumers at the pump in a meaningful way.
America also has additional capacity that could be ramped up. For example, oil production in the United States is down by an average of 1.1 million barrels a day compared to 2019 levels, suggesting producers, technically, have the capability to ramp up production by at least this amount. Again, though, it will take time for the additional capacity to come online and even more for it to translate into a marked benefit at the pump. The good news is that all things considered it looks like energy prices have like already peaked, save another geopolitical shock that impacts supply.
As a result this will likely also mean that we will see a peak in the consumer price index (CPI) and other headline consumer inflation gauges sometime during the next few months. This does not mean inflation will not remain historically elevated for the foreseeable future, or that it will cause the Federal Reserve to ease off its recent tighter monetary policy initiatives. However, “less bad” is an important first step on the way to more normal and livable levels of inflation for Americans.
What To Watch This Week
- John Williams Speaks 12:00 PM ET
- Charles Evans Speaks 12:40 PM ET
- 3-Yr Note Auction 1:00 PM ET
- NFIB Small Business Optimism Index 6:00 AM ET
- CPI 8:30 AM ET
- 10-Yr Note Auction 1:00 PM ET
- Thomas Barkin Speaks 5:30 PM ET
- MBA Mortgage Applications 7:00 AM ET
- PPI-Final Demand 8:30 AM ET
- Atlanta Fed Business Inflation Expectations 10:00 AM ET
- EIA Petroleum Status Report 10:30 AM ET
- 30-Yr Bond Auction 1:00 PM ET
- Jobless Claims 8:30 AM ET
- Retail Sales 8:30 AM ET
- Import and Export Prices 8:30 AM ET
- Business Inventories 10:00 AM ET
- Consumer Sentiment 10:00 AM ET
- EIA Natural Gas Report 10:30 AM ET
- 5-Yr TIPS Announcement 11:00 AM ET
- 20-Yr Bond Announcement 11:00 AM ET
- Baker Hughes Rig Count 1:00 PM ET
- Loretta Mester Speaks 2:30 PM ET
- Fed Balance Sheet 4:30 PM ET
- Patrick Harker Speaks 6:00 PM ET
- Raphael Bostic Speaks 9:30 AM ET
- Empire State Manufacturing Index 8:30 AM ET
- Industrial Production 9:15 AM ET
- Treasury International Capital 4:00 PM ET