Oil has plunged around $15 a barrel over the past month but gasoline prices have inched down by just a penny in the same span, with persistently high costs at the pump frustrating both inflation-weary drivers and the White House, which again raised concerns about potential price gouging.
Data from the American Automobile Association (AAA) shows national average gasoline prices have fallen from $3.402 a month ago to $3.390 on Nov. 30, or barely over one cent.
By contrast, U.S. oil (West Texas Intermediate) futures prices have fallen from around $84 a barrel on Nov. 1 to about $69 a barrel on Dec. 1—a drop of around 19 percent—driving speculation about when cheaper crude will push down prices at the pump.
“The recent drop in futures prices could result in a discount of around 25 cents per gallon or more,” Mark Jenkins, spokesman for the AAA, said in a statement, adding that it would be “unusual for that discount to hit the pumps overnight.”
“Gas prices normally rise like a rocket and fall like a feather. So it could take weeks before gas prices fully adjust,” Jenkins said.
Tom Kloza, global head of energy analysis at the Oil Price Information Service (OPIS) at IHS Markit said in a Twitter post that he expects drivers will see some relief at the pump in December.
“Futures and spot market crashes for gasoline continue,” Kloza said. “OPIS sees spot prices down 7-8.5 cts gal in all bulk markets, surpassing Fri lows. COVID-fears will drive street prices lower in December.”
The Biden administration expressed frustration at the slow impact of cheaper crude on prices at the pump.
“We’re frustrated because you’ve seen a decrease in oil prices … you’ve not seen a decrease in gas,” White House press secretary Jen Psaki said at a Tuesday press briefing. “It is incredibly frustrating.”
“It doesn’t take an oil market expert to recognize that that doesn’t sound, look, or smell right,” Psaki said, adding that President Joe Biden has asked the Federal Trade Commission (FTC) to probe possible anti-competitive by oil companies that may have pushed up gasoline prices at the pump.
Biden said in a Nov. 17 letter to FTC Chair Lina Khan that there was “mounting evidence of anti-consumer behavior by oil and gas companies,” pointing to an apparent market dislocation—falling production costs and declining prices of unfinished gasoline, while pump prices are up.
The president’s letter prompted a critical reaction from the American Petroleum Institute (API), the nation’s biggest trade association for the oil and gas industry. API called Biden’s letter to the FTC a “distraction” and blamed his administration’s “ill-advised” policies for constraining the country’s energy supply and exacerbating the pain at the pump.
Reacting to the news of White House anxiety over the slow impact of lower crude prices on retail gasoline costs, GasBuddy head petroleum analyst Patrick De Haan said it would happen—eventually.
“Patience—it will happen. Stations refuel every 3-5 days, lower prices are coming. However with some uncertainty over omicron, they may pass it along more slowly,” De Haan wrote in a Twitter post.
Fears of a global economic slowdown driven by the emergence of the Omicron variant have sparked major market volatility in recent days, with several sharp risk-off episodes pushing down stocks and oil.
AAA spokesperson Andrew Gross said it’s too soon to tell if Omicron fears will have a lasting impact on crude prices.
“For now, the upward pricing pressure due to tightened supply and high demand seems to have abated, and that will likely result in pump prices stabilizing,” Gross predicted.
Some analysts expect the drop in crude prices to be short-lived. JP Morgan predicted in its most recent 2022 economic outlook that oil prices will hit $125 per barrel next year and $150 in 2023, as OPEC+ producers won’t be able to ramp up production due to chronic under-investment.