Gasoline prices are displayed as fuel costs continues to climb close to record setting territory in Encinitas, California, U.S., May 9, 2022. REUTERS/Mike Blake
July 5 (Reuters) – Fears of global recession sent U.S. gasoline futures down 9.7% on Tuesday, the biggest one-day drop in 16 weeks in a move that could cool retail fuel prices and accomplish an often-stated White House objective.
U.S. President Joe Biden has repeatedly criticized the oil industry over fuel prices, as recently as Sunday urging gasoline station operators to “bring down the prices you are charging at the pump.”
U.S. gasoline futures settled down 9.7% to $3.329 per gallon, in tandem with an $8.93 per barrel drop in U.S. crude oil futures that traders attributed to worries over demand destruction due to high prices and the prospect of a recession. read more
Gasoline prices globally have risen due to high demand, lack of Chinese exports that had bolstered supplies, and less global refining capacity from pandemic-related closings. Prices have also been exacerbated by sanctions on Russian energy exports over its invasion of Ukraine.
If the declines in gasoline futures are sustained, retail prices could fall as much as 65 cents a gallon, according to track website GasBuddy. The national average for a gallon of unleaded was $4.80 on Tuesday, down from $4.88 a week ago.
“We’ve seen a lot of volatility this year but lower economic activity could really hurt demand for fuels,” said a gasoline trader, who spoke on the condition of anonymity.
It may take days or weeks for wholesale prices to be reflected at the pump, analysts said, because retailers tend to pass on decreases in small increments over time to lock in margins.
In March 2020, the gap widened to $1.64 a gallon as wholesale prices crashed amid the worsening coronavirus pandemic and oil producers flooding the market with barrels. It did not return to a more normal spread for two months.
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