Will Gas Prices Stay Cool as Summer Heats Up?

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• The national average gasoline price has declined in recent weeks due to lower demand, AAA notes, dropping to $3.44 a gallon at the start of this week as gasoline stocks remain relatively plentiful.

• Gas prices across the nation are trending lower than during the past two summers, especially 2022, which saw the national average approach $5.00 in many states.

• A number of states, particularly in the South, are currently seeing prices around the $3.00 mark heading into the busy July 4th travel holiday.

Intense heat waves combined with the summer driving season and instability in the Middle East usually sound like a recipe for higher prices at the pump.

But for now, gas prices have been holding steady, and have actually declined in recent weeks.

Last week the national average gas price declined by several cents, dropping to $3.44 a gallon by Monday, June 17, and painting a very uncommon picture for the period between Memorial Day and Independence Day.

This year, June prices are slightly below what we saw a year ago—and a whole dollar and a half below the average prices seen in 2022, hovering around $5.00 a gallon.

"The main reasons for the decline are lackluster gasoline demand and burgeoning supply," AAA noted last week.

What's more, the decline in gas prices seen in early June actually represented the largest weekly drop of the year, with an 8-cent drop reported by the AAA on June 6 compared to a week prior.

"This drop in pump prices appears to have some sticking power for now," Andrew Gross, AAA spokesperson, said during the first week of June. "More states should see their averages dip below $3 a gallon in the coming weeks."

One fairly significant difference, compared to prior years, has been weakening demand in the past few months, with AAA noting at the start of June that total domestic gasoline stocks have been quite high lately—unusual for what should have been a busy driving season with some distance from the worst months of the pandemic.

Instead, the last weeks of spring appear to be seeing quite modest demand, compared to prior years. Gas demand rose a bit at the start of June, but domestic gasoline stocks increased as well, reaching 233.5 million barrels as production increased.

Overall, AAA points to weak demand, economic worries, and a still-growing supply, in addition to surprisingly stable oil prices for the relatively timid prices at the pump heading into the July 4th driving holiday.

"Gasoline demand has trailed 2023 for most of this year, and analysts believe economic uncertainty may suppress demand this summer," Gross said a few days ago.

There is one more element to keep an eye on as we approach the busy July 4 travel week, and that's heat waves.

Among other things, prolonged and intense heat waves in parts of the country have at times caused refineries to shut down or reduce output in addition to driving local demand higher, as car owners seek refuge in their cars (with the A/C on, of course).

This happened in late July of 2023, among the more recent instances. That's before we add factors like local electrical grid overloads due to increased home A/C usage.

While refinery outages along the Gulf Coast aren't expected at the moment—as the latest heat wave is largely confined to the Midwest and the East Coast—poorer fuel economy is certainly in the cards for those affected by soaring temperatures in several parts of the country this week.

Just where are gasoline prices actually the lowest at the moment?

It's still the usual suspects, with states like Mississippi, Arkansas, Oklahoma, Louisiana, Texas, Kansas, Tennessee, Missouri, and Alabama all seeing gas price averages below $3.10 or even $3.00 by the end of last week.

At the moment, the total domestic gasoline stocks along with weak demand have given the average gas prices a significant break as July 4 approaches, with a number of states, even California, recording significant drops over the past couple of weeks.

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