U.S. national gas prices dropped to below $4 per gallon for the first time since March. Cheddar News speaks with Robert Sinclair, senior manager of public affairs at AAA Northeast, who explains what's fueling the decline. 

Closing Bell

Gas Prices Fall Below $4 Per Gallon, But Will the Drop Continue?

Welcome back to cheddar news is closing bell. Everyone kristen Schoeller here on the floor of the new york stock exchange and americans getting some relief at the pump as gas prices fall below $4 a gallon on average. Today, that is the lowest level since March. The national average cost of a gallon of regular gasoline now standing at $3.99 according to triple A, which is still higher than what it was a year ago, but well below that peak of over $5 a gallon in mid june Well gas prices now down for 58 straight days. We'll take it. And joining me now is Robert Sinclair, senior manager of public affairs at triple a northeast Roberts. Great to see you welcome news. I think for many Americans who have been struggling cutting back on traveling, taking different routes to deal with higher prices at the pump. During this busy summer travel season. What's been taking these prices lower? I think it's the cutbacks that you mentioned that drivers just could not deal with the high gasoline prices that we had been seeing and they stopped buying gasoline. They stopped a lot of discretionary travel. And this coming during the summer driving season when 85 to 90% of folks who take a trip drive to their destinations is very significant. Usually we see a significant drop off in demand with the labor day weekend when the kids go back to school and parents have their vacations ending, But we might not see that drop off. We may have already seen the drop off because of these high prices and it corresponds with what drivers told us in a survey where 60% said $4 a gallon was a problem, 75% said $5 a gallon was a problem. And the number one thing they would do in response is to drive less and we're seeing demand. That's 8-9% less than where we were a year ago. So that's one of the main reasons we're also seeing, I think the casual investors in crude oil head for the exits looking for other investments because they're worried about a global and, um, inflation and global recession. Um, and that would drive down the demand for petroleum products and with their investments. So they were looking for other things. So what I'm gathering based on what you're telling me is a similar story to what our economists who came on the show at this time yesterday told me as well what we saw in july that downward pressure on prices definitely gas consumer prices overall largely driven by gas might just be a blip and a bit of a breather. Is that right? That could be, we could see prices go up. We still remain vulnerable as far as, uh, the weather is concerned. Um, like a major storm hitting the gulf coast where a quarter to a third of our oil and gas infrastructure is located, could send prices, uh, to places we've never seen before overnight. And last week, the national Oceanic and atmospheric administration said conditions exist for above average number of hurricanes, hurricanes usually peak in august, but the season goes to the end of november. So we need to be looking at the weather. The main thing that we should look at as far as gasoline prices are concerned. Well, of course, President biden has been under a ton of pressure to take prices lower across the board, especially at the pump for american families. And of course, in the wake of that trip to Saudi Arabia, I think many people were hoping that prices even at this point would be lower. Here's what the president had to say in terms of what he is doing in a virtual meeting last month. Let's take a listen. I lead the world to coordinate the largest release of oil reserves in history, including from other countries in total more than 240 million barrels to boost global supply. During that time, we've also been working to increase US production today. We're producing 12 million barrels per day and we're on track to hit a near record high. Okay, Robert. So that video dated July 21 just a few weeks ago, do you think the president has been successful in those efforts? Well, he may be, but you can have crude oil coming out of your ears and we still don't have sufficient refinery capacity to deal before the extra crude oil to turn it into finished gasoline that we need at the pump. We also don't have enough truck drivers to drive the trucks that will get that gasoline to the pump. And you know, the chairman of Exxon last week, in the midst of the announcement that they made $23 billion dollars in the first half of this year said that we've lost roughly three million barrels of daily global refinery capacity uh, since the pandemic with projects being put off or delayed. So all the crude in the world won't make a big difference if you don't have enough refineries. But the main thing also we have to keep in mind is the fact that there is still major sanctions against Russia and it's crude oil and it is a major producer nine or 10 million barrels per day. Global consumption is 100 million barrels per day. So roughly 10% has been lost due to sanctions. And it was very interesting about three weeks ago when the U. S. Kind of showed a crack in the sanctions when they said they would process payments by two Russian energy companies sending crude to third party nations in order to forestall global economic problems and food problems And crude oil prices dropped $10 per barrel nearly overnight in response. So there's still a lot more going on that the president can do anything about that is leading to the problems that we're seeing today, Robert. Let me ask you this because Russia continues to invade Ukraine. It's something that the us is not, Not necessarily capable of stopping outright. Clearly, as we've seen a dragon for months, that invasion alone in the impact on the global supply chain, how much of an effect is that about 30% of the market share in terms of what is impacting weight of, what is impacting the price of gas at the pump? I think it works out to around 10% a little bit higher, a little bit lower, depending on what day it is. Um, but that, that major loss of that Russian crude because of these sanctions is what really exacerbated problems that we're seeing as far as supply was concerned even before uh, that nation invaded Ukraine. Uh, that OpEC plus was having a tough time keeping up with global demand that was really surging back after nations emerged from Covid, particularly in china and shanghai. Um, and so that we had problems even before that started. So even if that problem was to end, if the war were somehow to miraculously stop miraculously stopped and they would be returned to normalcy. As far as politics and markets are concern, we would still probably have supply problems because countries are the ones that could be pumping a lot extra crude oil have no incentive to, they're making plenty of money as things are right now. Saudi Aramco last year, it made close to $200 billion what motivation do they have to pump extra crude? And the Opec Plus said next month that they'll pump an extra 100,000 barrels. Global consumption is 100 million barrels per day. So it's literally a drop in the bucket. Won't make that much of a difference, robert Sinclair, senior manager of public affairs at Triple A Northeast robert, always good to see you and thanks so much for the insight.