Israel and Iran have been in open conflict. Ukrainian drones have repeatedly attacked Russian oil refineries. And OPEC continues to hold back oil supply.
All of these alarming developments raised fears of $4 gas that would hurt the US economy and worsen inflation.
Yet that has not happened, at least not yet. US gas prices have stopped rising and even briefly dipped in recent days.
The national average stood at $3.66 a gallon on Monday, down from $3.68 a week ago, according to AAA.
Now, there is growing hope that gas prices are at or near a peak for the spring – or perhaps even for the year.
Patrick De Haan, head of petroleum analysis at GasBuddy, is predicting drivers will get relief at the pump in the coming weeks.
“I’m hoping the worst is behind us,” De Haan told CNN. “Unless there is something drastic that happens, there are increasing odds the national average has hit the projected spring peak.”
Tom Kloza, global head of energy analysis at the Oil Price Information Service, also expects gas prices to dip in the coming weeks.
“Most of the worries for the first half of the year are over. I think we’re in the clear until hurricane season,” said Kloza.
‘Could have been much worse’
Of course, none of this is to say gas prices are cheap. They were lower in April 2021 as well as in the spring of 2020 when Covid-19 kept many Americans off the roads.
Still, a springtime peak below $3.70 a gallon would be a win for consumers given the real risk of significantly higher prices at the pump.
“It could have been much worse,” said Andy Lipow, president of consulting firm Lipow Oil Associates.
Drivers in just seven US states are paying $4 a gallon or more for gas, according to AAA. All of those states are in the Western half of the country, led by California, where the state average is $5.40 a gallon, up from $4.88 a year ago.
The national average is nowhere near the unprecedented spike above $5 a gallon in June 2022.
“It’s clear to me this is not going to be a record-setting year. It will feel much more normal to fill your tank this year,” said De Haan.
Economic, political consequences
Officials in Washington would also likely be breathing a sigh of relief.
Rising gas prices earlier this year have contributed to worse-than-expected inflation readings that have cast doubt on when the Federal Reserve will be able to lower interest rates.
A spike in gas prices would be the last thing President Joe Biden needs as he struggles to convince voters of his economic message before November. Biden’s approval rating for the economy stands at just 34% and it’s even lower (29%) for inflation, according to a new CNN poll.
Underscoring concerns in the White House about gas prices, earlier this month the Biden administration backed off concerns to buy crude oil for the US Strategic Petroleum Reserve, the emergency oil stockpile.
Some analysts expect gas prices to still go a bit higher.
Lipow said he thinks the national average will peak at $3.75 a gallon this year.
Still, that would be below the peak of $3.88 a gallon last year – a peak that didn’t occur until September.
“I’m not looking for a spike in gas prices,” Lipow said.
Why gas prices have cooled
There are multiple reasons why gas prices have stopped rising for the moment.
First, oil prices have stopped spiking. US crude nearly hit $88 a barrel on April 12 as investors braced for Iran’s retaliation against Israel for a suspected strike on an Iranian diplomatic complex in Syria.
But oil prices tumbled after that retaliation was largely blocked by Israel and its partners. Fears of a wider conflict in the Middle East have eased for now, although that could of course change with little notice. US crude dipped below $83 a barrel on Monday.
There are also seasonal factors at play.
The switch to more expensive summer-grade gasoline at US refineries is now over. Likewise, gasoline supply has been helped by the return of refineries that were sidelined for routine maintenance.
The supply of oil continues to be boosted by record-shattering US crude production. All of that US oil, led by the Permian Basin of West Texas and New Mexico, is offsetting production cuts by OPEC+, the producer group led by Saudi Arabia and Russia.
Meanwhile, demand for gasoline has been relatively subdued despite other signs that American consumers are spending aggressively.
Hurricane season looms
There is a risk of a double peak in gas prices. That’s what happened last year as gas prices hit a top in April, cooled off and then rebounded late in the summer as extreme heat sidelined US refineries.
“Weather can wreak havoc,” said Kloza, the OPIS analyst.
Perhaps the bigger risk is a severe hurricane that disrupts oil refineries in the US Gulf Coast.
Forecasters are warning it could be a very busy hurricane season (which traditionally begins June 1), with the Colorado State University predicting more hurricanes and named storms than ever before.
“Hurricane season is the next major hurdle,” said Kloza.
