Will Gas Prices Go Down This Summer?

After months of sky-high gas prices, the cost at the pumps has dipped in recent weeks. The national average for a gallon of regular-grade gasoline now stands at $4.25, according to the AAA.

The country's highest prices are usually in California, which has an average price of $5.64 on July 29—down from a peak of $6.44 in June. The lowest average is in Texas at $3.76.

This drop in gas prices—which was forecast by Richard Joswick, head of global oil analysis at S&P Global Commodities Insights—is welcome news for drivers as the U.S. enters a recession and grapples with surging inflation.

The AAA has warned, however, that "rebounding gas demand and crude prices" could change the situation quickly. The difficult task of balancing supply and demand, plus geopolitical factors such as the war in Ukraine and the decades-long turmoil in the Middle East, all have an impact on gas prices.

The national average price is still about $1 higher than it was one year ago. Newsweek has asked industry experts how and when the cost of gas could fall significantly.

Why Gas Prices Are So High

Gas prices were fairly stable for much of 2021, hovering around $3 to $3.30. In February this year, however, they began to rise sharply.

In the first week of February, the national average for a gallon of gas was $3.44, according to the U.S. Energy Information Administration. A month later—following market scares and uncertainty linked to Russia's invasion of Ukraine—the price had jumped to $4.10.

The EIA's average hit its high point in the second week of June, standing at $5.01.

Chris Higginbotham, press officer at the EIA, explained that demand for gasoline and other petroleum products, such as diesel and jet fuel, had fallen significantly in 2020 because of the pandemic. Then, as the economy began to reopen, people started driving to work again and traveling more.

Around the third quarter of 2020, he said, "we've got demand starting to come up, and then through 2021 demand continued to increase, but supply wasn't enough to satisfy the growing demand.

"In 2020 when the demand was low, companies that were producing crude oil, that were refining crude oil into gasoline and diesel, brought down their operations. What we saw in 2021 was that the demand for those products had just returned much more quickly than production had. So, a typical supply-and-demand situation," he said.

In late February, President Vladimir Putin launched the full-scale invasion of Ukraine, placing additional pressures on prices.

Higginbotham said: "There were sanctions, there was uncertainty about what was going to happen next—which countries are going to launch sanctions against Russian energy products? A lot of uncertainty was entering the market.

"Additional uncertainty in the market has an outsized effect on prices, because you're dealing with low storage and [then] uncertainty like there could be more supply disruptions."

When Will Prices Go Down?

Even though the gas and oil industry is starting to get back to "normal" levels of production, the average price of a gallon is not likely to drop below $4 until at least October, once the summer holidays have ended and demand has slowed.

As Gabe Ortega, fuel pricing practice leader at PDI Software, explained in June, the end of the summer driving season typically brings a drop in gas prices, as people have less spare time to go out and the supply-demand ratio becomes more stable.

Higginbotham said: "Our expectation or forecast is that [Brent] crude oil prices will remain above $100 per barrel until October—and then we'll see. It looks like for 2023 our expectation is that Brent crude will remain below $100 per barrel on average. Looks like $93, pretty consistently, from month to month.

"For gasoline prices the expectation is that they will go down in 2023 to about $3.57 per gallon. According to our estimate, October will be the first month that the average price will be below $4 per gallon, at about $3.87."

Man filling car tank
Stock image of a man filling up his car and looking shocked at the cost of gas. Prices per gallon have dipped in recent weeks, but are still more than $1 higher than they were a year ago. Getty Images