October 6, 2022

American drivers are getting relief at the pump, with gas prices falling for seven straight weeks after hitting record highs in June. But there’s good news and bad news behind the drop in natural gas prices, experts say.

The average price for a gallon of natural gas fell to $4.14 a gallon on Thursday, with prices falling 8 cents a gallon since Monday alone, according to AAA. The drop marks a significant retreat from the all-time high of $5.02 a gallon, which was reached on June 14.

Natural gas prices are falling for a variety of reasons, including rising gasoline production and falling costs of crude oil, which is the main determinant of costs at the pump, according to Ellen Wald, senior fellow at the Atlantic Council.

But there’s another reason for the decline, according to Wald, that could point to broader economic issues: Americans are cutting back on driving as a way to deal with inflation.

“We’ve seen some of what we call ‘demand destruction’ — people choosing not to buy gas because it’s so expensive,” Wald told CBS News, adding that “Fears that we could enter a global recession could reduce prices”.

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The US economy shrank in the second quarter, recording a second quarter in a row shrinking GDP — often considered the hallmark of a recession. But that’s not the whole picture considered by the National Bureau of Economic Research, the group that makes the official call on whether the US has slipped into a recession. The NBER looks at a number of other economic indicators, including employment, which has remained strong this year.

But the shrinking GDP has fueled a debate over whether the nation has entered or is heading into recession, with economists increasingly concerned about signs that consumers are cutting back on spending to cope with the highest inflation in 40 years.

Meanwhile, gasoline prices could continue to decline, at least in the short term, according to experts. The national average could drop to $3.99 a gallon within days, wrote Gas Buddy analyst Patrick DeHaan.

“[I]n ~ 100 hours, we will see the national average drop to $3.999 per gallon, the lowest and first time since March 5,” De Haan wrote Thursday. “Some US stations could even drop to $2.99/gallon by then.”

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