CASPER — The price at the pump has started to decline after rising sharply through the end of spring. Since that increase accelerated, Wyoming’s numbers have followed a couple of weeks behind the national trend.
The average price of regular gasoline across the U.S. briefly surpassed $5 per gallon in mid-June, according to AAA. In Wyoming, it stopped just short, peaking at about $4.90 on July 1.
Regular gasoline has since fallen, nationally, by nearly 34 cents. Wyoming has seen its averages drop, more recently, by a little over four cents for regular gasoline, which cost $4.86 per gallon on Monday, and close to six cents for diesel.
President Joe Biden didn’t force refineries or gas stations to cut back on their profits in order to ease the strain on U.S. consumers. Nor did sellers decide unilaterally that the time had come to lower prices.
“The biggest reason they’re going down is the price of oil,” said Rob Godby, an economics professor at the University of Wyoming.
Global oil production is still below pre-pandemic levels, causing demand to exceed supply and making prices go up as a result. After cratering along with demand in 2020, the price of oil climbed through 2021, then soared after Russia invaded Ukraine.
Oil and gas trade group American Petroleum Institute, reached for comment, directed the Star-Tribune to a fact sheet that began, “Petroleum prices are determined by market forces of supply and demand, not individual companies, and the price of crude oil is the primary determinant of the price we pay at the pump.”
U.S. oil benchmark West Texas Intermediate (WTI) closed above $110 per barrel for more than two weeks in early June, according to Insider, and drove gasoline prices to record highs (not accounting for inflation). Then it started to fall.
Last week, WTI closed below $100 per barrel on two consecutive days for the first time since April. That’s about $30 more than at this time last year.
But it’s enough to start pushing gasoline prices back down.
Oil contracts try to account for market conditions a month or two into the future. And they’re currently pricing in “an assumption that demand for oil is going to decline,” Godby said, “due to a number of factors in the economy.”
The main worries, he said, are that recession in the U.S. and several other countries along with ongoing attempts to curb the spread of COVID-19 in China will substantially reduce the world’s oil consumption. Plenty of other factors are also at play: Demand for oil tapers along with driving as summer subsides.
Russia may be managing to export more oil to the international market than anticipated, despite the sanctions imposed by the U.S. and Europe. Oil cartel OPEC, which has played an outsized role in keeping global production low, is considering ramping up.
But oil isn’t the only thing affecting gasoline prices.
Refining and distribution face their own constraints. So many U.S. refineries shuttered early in the pandemic that the remainder, now running near full capacity, still aren’t producing enough gasoline.
High fuel prices mean even the diesel-fueled tanker trucks that transport gasoline to gas stations are more expensive to operate.
And then there are taxes, which are easier for U.S. officials to adjust than market prices or supply chains. A total of 42 cents in taxes are levied against every gallon of gasoline sold in Wyoming — 18 cents by the federal government and 24 cents by the state — and used to fund infrastructure work, including highway maintenance.
Congress is considering a federal gas tax holiday.
Gov. Mark Gordon’s Gas and Diesel Price Working Group — assembled to help the state evaluate that and other options — will hold its first public meeting Friday.
“This information is critical to developing policy, regardless of short-term price fluctuations,” Michael Pearlman, Gordon’s communications director, said in an email.
According to Godby, the overall price of gasoline influences the value of actions the government may take to lower prices, including tax holidays.
“As the other components go up in cost, specifically oil, then those other things that don’t really vary as a proportion of the gasoline — they become less important,” he said.
State and federal taxes contributed less than 10% to Monday’s statewide average of $4.86 per gallon.