(NewsNation) – American consumers tired of being scammed at the gas pump had a glimmer of hope earlier this week as the price of oil dropped below $ 100 a barrel.
President Joe Biden saw this too, tweeting“Oil prices are falling, so should gas prices.”
As gas prices have soared to record highs in the past few days, Americans are looking forward to some relief when refueling.
The national average for a gallon of gas on Wednesday surpassed $ 4,305, according to AAA.
So why are gas prices still so high and when can consumers expect prices to drop?
It boils down to supply and demand.
Fuel prices typically rise in the spring and summer as demand increases and Americans drive and fly more.
Gasoline prices have risen hand in hand with oil prices since spring 2020 as demand has grown faster than world production as economies try to shake off the pandemic.
More and more people are driving and flying, and businesses are returning to pre-pandemic activity levels, leading to higher energy consumption, which pushes prices higher.
Falling oil prices took some pressure from inflation sweeping the world, with a barrel of US crude oil dropping below $ 100 a barrel after hitting $ 130 last week.
But “oil companies don’t set market prices; people do it, filling their tanks, “said Patrick De Haan, gas analyst for GasBuddy, who tracks gasoline prices in the US
The price of oil is fixed on the world market. Even the major producers – the United States, Saudi Arabia and Russia – fail to set the price, although they may try to increase or decrease production, a process that takes time even when it works.
U.S. production dropped dramatically in 2020 as the pandemic crushed demand, forcing producers to shut down some of their wells rather than selling their oil at too low a price.
“The stations lost their shirts on the way up, so the decline will be slow, but it has already begun,” De Haan tweetedsaying he was seeing a “slow decline” in pump prices.
There is a lag between changes in oil prices and changes in pump prices, and that lag is even slower when prices go down.
“It always seems like prices at the pump are going up much faster than going down,” said Doug Shupe with AAA.
When the price of oil starts to rise, you will see gas prices rise a few days later, as stations will pass that increase on as quickly as possible to avoid losing money. A sharp rise in crude oil prices is typically followed by a rise in gas prices three to five days later, De Haan explained.
When crude oil prices start to fall, gas stations may not be in such a hurry to cut prices.
Shupe said gas stations have already bought the gas they have now at a higher price, so it will take some time before we finally see some relief.
According to GasBuddy spokesperson Nicole Petersen, there’s still a big incentive for gas stations to cut prices, though, to steal customers from their competitors.
However, “it’s not going to be a good summer for motorists,” De Haan said.
The Associated Press and Reuters contributed to this report.