Javad Fadardi experienced something Friday that Bay Area drivers haven’t felt at the gas pump in months.
“Relax,” he said as he filled up his Saab for well under $6 a gallon at Berkeley Gas & Smog in Berkeley.
After months of record highs, gasoline prices fell to a US average of $6.15 a gallon on Friday. That’s down nearly 30 cents from the record set in mid-June, and savvy travelers can now buy fuel in the $5 range on average.
“It matters,” said Fardardi, a professor of psychology at Claremont Graduate University. He paid $76 to fill up Friday, about $25 less than his last gas station visit. “You look at the (gasoline price) sign and you feel safer.”
Declining fuel costs are largely due to the falling price of oil – now below $100 a barrel — as worries about a possible recession drive the oil market, according to industry experts.
But motorists hoping for a return to gas prices in early 2022 – before oil markets crash ahead of Russia’s invasion of Ukraine – will have to wait a while longer. For California commuters, the era of paying $4.50 a gallon is a long way off, said Patrick DeHaan, head of petroleum analysis for GasBuddy, a company that collects data on gas prices.
“I don’t think things will normalize until the global situation normalizes and Russia gets out of Ukraine,” De Haan said, adding that prices are likely to remain high for the next six to 18 months, largely depending on the opportunity for economic recession. Going forward, gas prices will be “very uneven and uneven,” he said.
In the Bay Area, gas prices are slightly higher than the state average, with San Francisco leading the pack at $6.24 a gallon, followed by San Mateo County, according to AAA. Santa Clara County is the cheapest at $6.12 per gallon.
It’s also unclear how long the downward trend in gas prices will last. According to AAA, some of the declining fuel costs are due to softened demand for gasoline as prices have risen, but demand may pick up this month, putting upward pressure.
“July is typically the biggest month for demand as more Americans hit the road, so this easing price trend may be short-lived,” AAA spokesman Andrew Gross said in a statement this week.
In California, falling prices were also slightly offset by an increase in the excise tax on gas. The Tax increase on July 1 raised the price per gallon by about 3 cents.
Another problem with retail gasoline prices is that they have a history of rising rapidly in tandem with oil prices and falling slowly even when oil prices crash, a well-documented principle that economists call “up like a rocket, down like feather’. ” That’s because the main thing that forces gas stations to lower their prices is competition from other fuel stations, which can leave several weeks of lag between the drop in oil prices and lower gas station prices.
“People believe that stations make more money when prices go up, when the opposite is true,” De Haan said. He explained that stations often play catch-up as oil prices rise and sometimes lose money during periods of oil price spikes. That’s why stations are “in no rush” before dropping prices.
But prices at some Bay Area stations fell quickly. At Berkeley Gas & Smog, one of the area’s cheapest stations, the price dropped 15 cents Thursday through Friday to a cash price of $5.59 a gallon of regular, according to the station manager.
For Aldonia Porche, who put $30 in the gas tank of her Chrysler sedan, sinking gas costs are a relief. But saving a few bucks on charging isn’t enough to make a dent in her family budget.
“You’re too tired to spend time with your kids and grandkids because you’re worried about your bills,” said Porche, who commutes from Richmond to Berkeley. A few bucks saved this week at the pump? “It’s a band-aid for bleeding.”
Fuel prices are plummeting, but will Bay Area drivers ever see $5 gas again?