As I write, the posted price for a gallon of regular gas at my local Sam's Club is about $4.09, which can be up to a dime or so cheaper than elsewhere.
I remember seeing those prices like about 4 months back. Now I don't have a Sam's Club price tracker, and I don't have specifics as to how Gas Buddy computes daily prices, e.g., regular, mixed-grades, etc., but it looks like prices peaked in mid-June at about $5.02/gal. I do recall seeing regular at a gas station near my local Walmart at $4.99.
I understand why Biden wants to take credit for a 10% drop in gas prices since hitting an all-time high a month ago. But the fact remains that prices are still up about $1.50 higher than a year ago. What is the theory behind the drop? Releasing some oil from the strategic reserve? Note the US consumes almost 20 million barrels of oil a day, roughly a fifth of global demand. The US produces almost 15 million barrels a day. It net imports just over 7M barrels a day or about a third of daily demand. Biden announced he was going to release about 1M/day from our 600M strategic reserve. While one can argue operating at the margin can help, the fact is we are still competing on the tight global market for 6M barrels/day. Also a critical factor is declining refinery capacity, down to its lowest level in 8 years, with no new refineries in decades, some refineries being converted for other purposes, etc.
Was it Biden's shameful jawboning mom-and-pop gasoline station owners who on average make about a 1.4% margin on fuel sales? No, I don't think so.
I'm going to ignore subtleties like inelasticity of demand. But generally speaking, we would expec6 a drop in demand for higher prices. We would expect to see the price to drop for reduced demand. Demand is down by 10% compared to pre-pandemic 2019. Chinese growth has slowed as it continues to deal with pandemic concerns Futures markets in oil and gasoline are down in part to recessionary fears as central bankers hike interest rates to control inflation. And the dollar, at its strongest level in a generation, makes oil more expensive for other global importers. We see the signature "rockets-feathers" phenomenon (i.e., faster increases, slower decreases) as the industry worries about still tight global supplies and debates whether declining global oil prices are a sustainable trends.
