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Gas prices drop by almost 25 cents per gallon

JUANA SUMMERS, HOST:

Filling your gas tank can still be a painful experience, but drivers are starting to see some relief. The average price of gasoline has fallen by nearly $0.25 a gallon after hitting a record-high last month. NPR's Scott Horsley joins us now. Hey, Scott.

SCOTT HORSLEY, BYLINE: Hi, Juana.

SUMMERS: So, Scott, nobody would call gasoline a bargain today, but the price has come down a bit. What's going on?

HORSLEY: Yeah. AAA says the average price nationwide has dropped to about $4.78 a gallon. That's down from a peak just over $5 in the middle of last month. Gas prices are still pretty high by historical standards, though. And as a result, some people are driving less. They're combining errands. They're adjusting plans for summer road trips. Martha Walker is a teacher in Charleston, W.Va. She and a friend had been looking forward to a lengthy driving vacation down South this summer, but they redrew those plans because of the high price of gasoline.

MARTHA WALKER: I was going to go on a trip down the Mississippi River and through some Gulf states and back up the Natchez Trace. And we ended up going just to Saint Louis and coming back rather than doing the big, long loop.

HORSLEY: What's more, instead of driving to the beach this summer, Walker is planning to just visit some nearby state parks. And, you know, a lot of people are making similar changes. As a result, government data shows demand for gasoline is lower than it would ordinarily be this time of year.

SUMMERS: Is that decreasing demand why the price has come down from last month's record high?

HORSLEY: That's part of the story. We're also seeing increased supply. You need crude oil, of course, to make gasoline, and oil companies have been slowly ramping up production here in the U.S. They're pumping more oil now than at any time since the early months of the pandemic - about a million barrels a day more oil than they were a year ago. And John Kilduff, who's an energy analyst at Again Capital, says he expects that domestic oil production to keep increasing through the end of this year.

JOHN KILDUFF: So you're going to see these numbers here tick up even more. It's a terrific operating environment for exploration and producing companies. And they're going to pump. They're going to put wells in the ground, and they're going to take oil out of the ground and sell it because it's just too lucrative not to.

HORSLEY: And in addition to that increased U.S. oil output, OPEC members have been slowly boosting their production. And Kilduff says it's become increasingly clear that Russia's oil output is not going away. China and India continue to buy Russian oil. So global oil supply is up. Global demand for gasoline is down. That's a recipe for falling oil prices. The U.S. benchmark for crude oil has dropped below $100 a barrel.

SUMMERS: So, Scott, what does this all mean for drivers who need to fill up their tanks?

HORSLEY: Well, gasoline prices could have more room to fall. And remember, this is thanks to market forces, not, say, that cut in gas taxes that President Biden proposed. You might think the White House would be trumpeting this drop in gasoline prices. Instead, the administration's been urging refiners and retailers to cut prices further. Now, analysts do say if crude oil prices stay where they are right now, retail gasoline prices could drop by another $0.30 to $0.50 a gallon. That would be welcome news for people like Traci Eyre. She spent much of the last two years working from home, but now she's back in the office at a Kansas City law firm several days a week. And that 50-mile round-trip commute is still pretty costly.

TRACI EYRE: It's still pretty expensive. I'm trying not to do as much driving as maybe I was doing before. You know, it's - during the pandemic, my husband and I would just get in the car and just go for a drive just to get out of the house. We don't do that as much anymore just because, you know, that seems like a luxury expense now.

HORSLEY: Now, along with gasoline, the price of some other commodities has also started to drop, including building materials, corn, wheat. In many cases, these price cuts reflect fear that the global economy is headed for a recession, and certainly nobody wants to see that. But it could also spell some relief from our very high inflation.

SUMMERS: NPR's Scott Horsley, thank you.

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

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.