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Gas prices have dropped $1 in a little over a month. What's driving the dip?

A MARTINEZ, HOST:

The national average for a gallon of gas has dropped below $4, according to AAA.

LEILA FADEL, HOST:

It's a sharp drop from where prices were a little over a month ago, when the average hit $5 for the first time ever.

MARTINEZ: For more on where gas prices may be headed, we're joined by NPR's Arezou Rezvani, who covers oil and energy markets. All right. So gas prices have fallen a whole dollar in just a little over a month. What is driving this?

AREZOU REZVANI, BYLINE: So it all boils down to good old supply and demand. Global oil prices are down because demand is down. And you can see this here in the U.S. I mean, earlier this summer, when gas prices hit an all-time high, consumer demand cooled off. People stopped filling up their tanks like they once did. Some changed their summer travel plans, maybe postponed that cross-country road trip. So that's one side of it. The other side involves oil supply. The U.S. released a lot of oil from its emergency reserves. And oil producers have been capitalizing on higher oil prices by increasing production. So that's why we're seeing gas prices drop so much so fast.

MARTINEZ: All right, going to keep my fingers crossed here. Does this mean all gas prices are going to continue to drop? Or what are we looking at here?

REZVANI: So analysts I've spoken with say, yes, prices will continue to drop, at least for the short term. But longer term, the picture is a bit more complicated. I spoke with Patrick De Haan. He's an analyst with GasBuddy. And he says prices will probably drop another 20 to $0.30 in the coming weeks. But he's keeping a close eye on weather forecasts. Here's what he told me.

PATRICK DE HAAN: As we progress through August, we do start to see more tropical activity in the latter half of the month and into September. So there's certainly a risk of disruption moving forward.

REZVANI: So if there is a big storm that hits, something on the scale of a Hurricane Harvey that swept across the oil-rich region of Louisiana and Texas back in 2017, which knocked out 20% of refining capacity for some time, that could suddenly swing prices back up again.

MARTINEZ: All right. I'll be keeping an eye out on hurricane season. Any other factors at play, though?

REZVANI: Yeah. So geopolitics is another pretty big factor in all of this. Russia's war in Ukraine is, of course, still grinding on. And despite sanctions, some countries are still buying Russian oil. It is still on the market. There are more sanctions against Russia on the way. And there's no telling how Russia will react to that, you know, if they'll withhold gas and oil supplies or keep them flowing. What's also unclear is what certain countries that depend on Russia will do, especially as it starts getting colder. Will they turn to other oil suppliers? Will there be a greater squeeze on the rest of the global oil market? You know, all of this could potentially impact supply, demand and, ultimately, again, could impact prices.

MARTINEZ: Yeah. But what about OPEC? I mean, it was just a few weeks ago that President Biden was in Saudi Arabia, where he pushed Gulf nations to increase oil production. I mean, what came of that?

REZVANI: You know, not much. OPEC+ did announce a small increase in production. But it was seen more as a token gesture. And there are doubts they will increase oil production by much more. This oil cartel benefits from high oil prices. And so they're wary of overproducing, especially when there are doubts about where the global economy is headed.

MARTINEZ: All right. But what about here at home? What could influence gas prices?

REZVANI: Well, it all depends on whether Americans start filling up again. Right now, we're not seeing signs of that. People seem to be holding back because there's still quite a bit of anxiety around inflation, the overall state of the economy and the possibility of a recession.

MARTINEZ: NPR's Arezou Rezvani. Thanks a lot.

REZVANI: You're welcome. Transcript provided by NPR, Copyright NPR.

A Martínez
A Martínez is one of the hosts of Morning Edition and Up First. He came to NPR in 2021 and is based out of NPR West.
Arezou Rezvani is a senior editor for NPR's Morning Edition and founding editor of Up First, NPR's daily news podcast.