US gasoline prices have been falling steadily since an all-time high in mid-June, a positive development for President Joe Biden, attributed to slowing US demand and recession fears .
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Since reaching an all-time high of $5.01 per gallon (3.78 liters) on June 14, the equivalent of $1.32 per liter, the price of regular gasoline has been on a 35-day losing streak, according to AAA data. organization.
“I feel better,” reacted Rigobert Fokoua, who was refueling at a station in Rockville (Maryland). “My tank went from $80 to $60. »
For Bill O’Grady, from Confluence Investment, “oil prices have clearly fallen and fuel prices have been brought down with them”.
Above 120 dollars at the beginning of June, the price of a barrel of West Texas Intermediate (WTI), the benchmark for the US market, fell in mid-July to 95 dollars, before rising slightly this week.
This cooling is due to fears of a sudden slowdown in the economy, or even a recession, which would contract global demand for crude oil, but also for refined products, including gasoline.
This apprehension is largely related to the marked tightening of monetary policies, with sharp rate hikes by central banks, in particular the US Federal Reserve (Fed), recalls John Kilduff of Again Capital.
In the United States, the slowdown in gasoline demand is already palpable. It fell, during the week ending July 8, to its lowest level since the beginning of the year.
“It is an important advance”, underlines Bill O’Grady, “because we expected a very big summer season” on the roads, driven by the appetite of Americans to drive, after two years cut short by the coronavirus pandemic.
“Air” for consumers
“I tell myself that demand is falling because consumers are going out less because of high prices,” which remain more than 40% above their level last year, advances Brendan Anderson, visiting the Rockville station.
But historically, rising gas prices have had only a marginal effect on demand, recalls Bill O’Grady, who sees another possible explanation: the telecommuting revolution.
If teleworking is now possible, “when the price of gasoline rises, instead of going to the office for five days, you will only go two” a week, he argues.
“I expect prices to continue to fall through the fall,” says John Kilduff.
The White House on Monday welcomed the fall in gasoline prices, considered a strong psychological indicator for Americans, a decline that gives consumers “air”.
Republicans and part of public opinion blame Joe Biden for the rise in inflation, which could weaken the Democrats during the legislative elections on November 8.
In a memo, White House communications director Kate Bedingfield highlighted “historic actions” taken by President Biden to ease oil and fuel prices.
It is mainly about the decision to use an unprecedented amount of US strategic oil reserves, which have decreased by 136 million barrels since last September.
“The Biden government is doing the right thing (…) by putting oil on the market,” said Lyle Farmer, a lawyer, who was refueling at the Rockville station.
“There are two ways to respond to the problem,” moderates Bill O’Grady. “The first is to increase supply and the second is to reduce demand. (Biden) has done very little to increase supply and much to increase demand” with his strong economic support measures.
For Edward Moya, from Oanda, the recent rise in oil prices can be attributed even in part, “after President Biden’s trip to the Middle East did not translate into any commitment” by the Saudis to increase their production.
Supply remains restricted, mainly due to sanctions imposed on Ukraine.
Crude prices rose again on Tuesday, in part because “the market is concerned” that the US president will “announce climate action” on Wednesday, said Phil Flynn of Price Futures Group.
After admitting that it would be impossible for Congress to pass the environmental component of his program, Joe Biden intends to proceed by executive order.
To calm the price of black gold, his government is currently trying to put a cap on the price of exported Russian oil.
This project, which has received, in principle, the approval of the G7 but has not yet been detailed, should allow the continuation of Russian oil deliveries while depriving Russia of most of the profits derived from it.
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