US gas prices fell by another 5.1 cents on average on Monday, marking the 10th week in a row of consecutive declines. The average price of gas is now $3.86 a gallon, according to GasBuddy data.
That’s the lowest level since March, and should help consumers offset higher prices for food and other items.
The drop in gasoline prices has been swift. Last month, a regular gallon averaged $4.52, compared to $3.98 so far in August.
Lower gasoline prices will likely slow down overall inflation rate in August—by as much as 0.5 percentage points, according to Gregory Daco, chief economist at EY-Parthenon. It will then take some time for lower gas prices to feed into transportation costs and lower the prices of other items in the index, he added.
Will gasoline prices keep falling?
Both a fallback in consumer spending and increase in oil supply brought down oil and gas prices for the past several weeks. But as oil prices rally again, the pace of the decline in gasoline prices has slowed in some areas in the US. In the south and midwest, prices at the pump are not falling as fast as in the rest of the country or have even risen slightly
But there’s still plenty of room for gasoline prices to fall further in the west and northeast, where low refining capacity had kept them higher than in other regions, said Patrick De Haan, head of petroleum analysis at GasBuddy.
The situation could change quickly if there are further shocks to the global economy, including disruptions from natural disasters. “Thus far, Mother Nature has spared us from disruptions from hurricanes, but that remains a wildcard as we head into the peak of hurricane season,” De Haan said.
Russia’s invasion of Ukraine is another wildcard. Earlier this month, Russia said it would turn off the Nord Stream 1 natural gas pipeline for three days at the end of the month for unscheduled maintenance.
“If Russia does not restore that natural gas pipeline, Europe may have to turn to things like oil and heating oil to heat their homes,” said De Haan. He estimates benchmark crude prices will trade between $75 and $135 a barrel in the last three months of the year, compared to around $90 currently.