Oil prices climbed a bit this week, with Brent crude crossing $92 a barrel on Oct. 19, over concerns that the Israel-Hamas war could spill over to oil-rich countries. But motorists aren’t feeling the pinch.
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Gas prices at the pump continued their downward trend in the US this week, settling at a national average of $3.56 a gallon, according to the American Automobile Association (AAA).
The average gas price is now 32 cents lower than its peak a month ago, meaning drivers are saving about $5 every time they fuel up, AAA said.
“While gas prices are falling about a penny a day, that feels like a glacial pace,” said Andrew Gross, a AAA spokesperson. “The oil market is watching to see if the war between Israel and Hamas widens.”
Why are gas prices still falling?
Gas prices are seasonal and typically decline during fall and winter due to the makeup of winter-blend fuels, according to GasBuddy, an app that tracks gas price savings. During hotter months, gas tends to evaporate faster in the car fuel system. That’s why refineries produce different blends to suit varying seasons; the summer blend is a higher-grade fuel that only evaporates at much higher temperatures, making it costlier to produce.
While global oil prices and production levels set by the Organization of the Petroleum Exporting Countries (OPEC) do have a role in retail gas prices, a study by the Federal Reserve Bank of St. Louis found that the correlation is not always strong, and that local market factors like demand, regulation, and taxation have a larger influence than centralized national markets.
U.S. Secretary of State Antony Blinken meets with Saudi Crown Prince Mohammed Bin Salman in Riyadh, Saudi Arabia, October 15, 2023Photo: SAUDI PRESS AGENCY (Reuters)
The Israel-Saudi Arabia pact is “more possible now”
As the US readies sanctions and oil seizures from Iran for Tehran’s role in the Israel-Hamas conflict, an historic peace agreement between Israel and Saudi Arabia hangs in the balance.
“My forecast for the Saudi-Israeli normalization is that it’s more—not less—possible now,” Hassan Hassan, a program director at the geopolitics think tank New Lines Institute, posted on X. “Not sure when but it’ll be business as usual after the current situation blows over.”
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