On the eve of the summer heavy driving season in the United States, a sigh of relief was heard, on Memorial Day weekend, with the announcement of a bipartisan agreement on the federal debt ceiling. Also, holiday drivers were able to enjoy the lowest price of regular gasoline in a year, at a national average of around $3.40 per gallon.
For several reasons in the last sixteen months, the price of the barrel of oil has gone down from $120 a year ago to close to $70. For instance, the anticipated fall in Russian oil exports, resulting from sanctions imposed since the start of the war in Ukraine, has not materialized. In April, Russian oil exports, mainly to China and India at reduced prices, reached 8.3 million barrels, the same level since the start of the war. Additionally, sales released from the US Strategic Petroleum Reserve and other advanced economies pushed down prices. For instance, last year the US released around 200 million barrels from the Strategic Reserve, at an average price of $95 per barrel. The US Energy Department announced its intention to replenish the strategic reserve at the present lower rate of between $67 to $72.
Further, the lifting of strict pandemic restrictions in China, the world’s major importer of oil and other commodities, has yet to generate the expected increase in demand. Finally, production cuts agreed by the Organization of Petroleum Exporting Countries and other producers have not yet reduced global oil supply. These favorable circumstances can rapidly change, therefore consumers should enjoy the lower prices, while they last.