The average price of a gallon of unleaded gasoline in the U.S. fell to $4 a gallon Wednesday, a 20% drop from June’s peak, as demand for oil softens around the globe.
It is the first time since March that the average price of gasoline has been at $4 a gallon, giving drivers some reprieve as the rate of inflation remains near a four-decade high.
Gas prices in the U.S. set a record of $5.02 in June, according to data from OPIS, an energy-data and analytics provider. The fuel-price surge has been a big factor in overall inflation, according to economists. And as consumers feel the pinch, they tend to reduce consumption.
Demand for fuel in the U.S. declined for the first week of August by 3% compared with the first week of July, according to the latest data from the U.S. Energy Information Administration.
“What we are starting to see is that widespread inflation has really made a weaker consumer,” said
senior market analyst with Oanda Corp. “So what you have is a consumer that is not planning big trips. They are not fully back into the office.”
A July survey from AAA found that many people cut back on driving in response to the higher prices they had to pay at the pump beginning in March. Weaker demand for fuel contributed to lower gasoline prices, analysts said.
Fuel prices surged worldwide following Russia’s invasion of Ukraine, disrupting the global oil market. That coincided with a increase in demand for fuel in the U.S., according to the U.S. Energy Information Administration, contributing to higher gas prices in the U.S.
But slowing economic growth globally, including in China and Germany, have led to weaker demand for oil, which has driven down the price of gasoline for U.S. drivers, analysts said.
How long prices will decline partly depends on how much fuel refineries can make. Some U.S. refiners reported that they expected to slow operations during the fall.
Unforeseen geopolitical events and potential hurricanes in the Gulf of Mexico that knock out refinery operations could add to the volatility in oil prices, said
U.S. oil, gas and chemicals leader with Deloitte. Retail gas prices aren’t likely to fall much more given current market conditions, she said.
“We feel that retail gas prices will still be higher than prepandemic levels for some time,” Ms. Chronis said.
More than half of U.S. states had an average gas price below $4 a gallon as of Wednesday afternoon, according to OPIS, which is part of Dow Jones & Co., publisher of The Wall Street Journal. The states with the lowest fuel costs are concentrated in the South, where they have greater access to refineries and pipelines.
a 48-year-old aspiring pilot in Oklahoma City, said he is still trying to conserve gas even as fuel prices have fallen. The average price of gas in Oklahoma is $3.58 a gallon, according to OPIS. That is a 23% decline from the state’s June high.
Mr. Boehmisch takes his wife’s 2018 Honda Pilot on longer drives instead of his Jeep because of its better mileage, he said. The school where he takes pilot classes is an almost 30-minute drive away, contributing to his household’s approximately $100-a-week gas expense.
“I’m trying to limit as much extra driving as possible,” he said.
Gas prices are highest on the West Coast, which lacks the oil and fuel infrastructure seen in other parts of the country. The average price of gas in California is $5.40 a gallon, second-highest in the U.S. after Hawaii, according to OPIS. That is a 16% decline from the high California posted in June.
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“It’s still too high!” said Darryl Maddox, 41, from Los Angeles. “That’s like telling me the 20-foot ceiling is now 15 feet. I still can’t reach it.”
“I guess it’s better than 20 feet,” Mr. Maddox said.
Mr. Maddox, a healthcare worker, said he mainly drives to work and back, and has cut down on driving on the weekends to save on gas.
Prices also remain elevated in New York, where the average price a gallon is $4.40. While prices have dropped 13% from their high in June, that hasn’t helped much for drivers such as
from the New York City borough of Queens.
Mr. Salazar drives an ice-cream truck around Washington Square Park in Manhattan. He said high fuel costs are eating into his profit, especially when compared with what he was paying for gas last summer.
“Everybody in the ice-cream truck business is noticing that the prices are way too high,” he said. “So now it takes us more than $30 extra to fill up the tank.”
—Talal Ansari contributed to this article.
Write to Joseph De Avila at email@example.com and Lauryn Azu at Lauryn.Azu@wsj.com
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