The largest weekly declines were situated in Connecticut (-27 cents), Michigan (-10 cents), and Wisconsin and Indiana (-9 cents). The least expensive markets continue to be Missouri ($3.73), Oklahoma ($3.75), and Kansas ($3.75).
But will this easing persist heading into the busy driving season, or will the national average remain above $4?
Policymakers worldwide have responded to this crisis by injecting more supply into global energy markets, but the efficacy of these actions has been questioned by some analysts.
The White House recently announced that it would release one million barrels per day from the nation’s Strategic Petroleum Reserves (SPRs) for the next six months.
Sixty million barrels of oil will be released from storage by 31 International Energy Agency (IEA) industrialized countries, in addition to the U.S. withdrawal, the director of the organization confirmed Wednesday.
Investors have been keeping a close eye on U.S. storage levels.
Stockpiles at the Cushing, Oklahoma storage facility rose by 1.654 million barrels. Gasoline stocks declined 2.041 million barrels, while distillate supplies jumped 771,000 barrels.
Crude oil prices tumbled on the latest developments and extended their losses during the Thursday trading session.
May West Texas Intermediate (WTI) futures fell below $95 a barrel on the New York Mercantile Exchange. On London’s ICE Futures exchange, June Brent crude futures slipped under $100 per barrel.
But some experts purport that these short-term efforts will not address long-term problems plaguing the energy sector. As a result, the policy prescriptions could add to inflationary pressures and leave gasoline prices high for the foreseeable future, warns Campbell Faulkner, senior vice president & chief data analyst at OTC Global Holdings.
“The SPR release will only add to the inflationary pressure by distorting the crude oil market and keep WTI north of $90.00 a barrel as the release is instituting a soft price floor,” Faulkner told The Epoch Times.
“This will likely keep gas prices high due to persistent high oil inputs and be further exacerbated by the need for the U.S. to export additional distillates [diesel] to replace shut in Russian stocks. All of this points to an ugly year for North American consumers at the pump as peak distillate consumption season looms with poor refinery utilization/run rates.”
Rystad Energy agrees that this would only offer temporary relief for consumers, but this is still “the right decision” in the present climate, notes Claudio Galimberti, senior vice president of analysis.
Other economists have warned that some of the relief proposals at the federal and state levels could contribute to rampant price inflation and potentially disrupt central banks’ tightening campaigns.
Overall, global balances would remain unchanged over the next 12 to 18 months. This does take into account if current conditions stay the same: the average SPR release, no significant swings in demand, and production by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+.
“While the pace and duration are difficult to estimate now, the rise nevertheless looks inevitable,” Rystad said in a note. “From that standpoint, the ‘big bang’ SPR release makes very little change to the 2022–2023 global liquids balance.”
China also needs to be monitored, the independent energy research and business intelligence firm explained.
In response to outbreaks in pockets of the country, public health authorities have locked down financial hubs and major urban centers, including Shanghai. Will Beijing continue to impose lockdowns on cities throughout the country to adhere to its COVID Zero strategy, or will it realize the pressures placed on the world’s second-largest economy?
Additionally, industry observers aver, the United States consumes roughly 17 million barrels of crude a day, meaning that this injection from oil stocks would be good enough for about two weeks.
From last year’s tapping of domestic reserves to this week’s announcement, U.S. officials will need to discuss replacing these large volumes in the future eventually, purports Rebecca Greenan, senior vice president of finance and operations at CruxOCM.
“Together this is a large volume of crude that will need to be replaced sometime in the future and without excess production will create its own spike in gas prices. Current energy policy is not supportive of additional domestic production coming onto the market,” Greenan told The Epoch Times.
When it comes to where prices are headed, it will depend on the administration’s energy policies.
“With U.S. midterms later this year, pressure will be put on Biden and the Democrats as the relationship between presidential popularity and the price of gas are well established,” she added.
The Pain Has Already Been Felt
Over the last year, surging gas prices have swallowed chunks of consumers’ wallets, with some states more affected than others.A new study by Personal Capital, a digital wealth management company, revealed that its users had spent an average of $95 per week on gas in March. The average user spent roughly $56 each time they visited the pump, up from about $42 in April 2021.
The top four states were Connecticut ($73.48), New York ($66.15), Nevada ($65.94), and California ($65.84).
Surging gas prices have led to a reduction in oil demand, the automobile association noted.
Despite many of these efforts alleviating the financial strain on consumers, the actions taken by U.S. leaders are about buying the country time, argues Sankar Sharma, a market technician and founder of RiskRewardReturn.com.
He thinks in the medium- or long-term, WTI and Brent prices could return to $130, pushing up gas prices to around $6 per gallon, “especially if we can’t find alternate sources of oil supply within the six months and OPEC+ fails to increase the supply.”
“That will just make it more expensive to ship goods by truck and train, adding to overall inflationary trends,” the forecast said.
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