American consumers head into the July 4 holiday with gasoline prices at their lowest point since January. The national average fell to around $3.40 per gallon on Tuesday, and the price is under $4 per gallon in every state in the continental U.S.
Falling gasoline prices are a result of declining crude oil prices, which took another hit in trading Tuesday. U.S. crude fell below $79 per barrel on Tuesday, and Brent crude traded under $92 per barrel.
Cheaper gasoline, however, has not spurred an increase in U.S. demand. Americans are buying about five percent less gasoline than they did last year, even though a gallon is 18 cents cheaper.
Analysts continue to point to worries about the global economy as the main factor pressuring oil prices, and, in turn, gasoline prices. The Conference Board, a private research firm, said Tuesday that U.S. consumer confidence fell for a fourth straight month in June. The preliminary confidence index dropped to 62 this month from 64.4 in May.
Currently, crude oil inventories in the U.S. stand at 22-year highs, while demand for the refined products declines. The oil market also realized Tuesday that Tropical Storm Debby would not have a lasting effect on Gulf oil and gas operations. About 600,000 barrels per day of output was shut down as a precaution prior to Debby, but companies are preparing to restart that production.
Oil traders believe U.S. crude oil prices may be headed toward $75 per barrel if consumer confidence continues to erode.
U.S. average gasoline prices reached a peak of $3.94 per gallon on April 2, but the price has now fallen for 12 consecutive weeks, according to the Energy Information Administration. The national average price for unleaded gasoline fell 50 cents over the 12 week period.
The current 12-week drop in gasoline prices is the second-longest period of declining pump prices recorded by EIA’s weekly fuel price survey since the drop at the end of 2008, when pump prices fell for 15 straight weeks.
The Energy Information Administration says the price of crude oil accounts for about two-thirds of the retail price of gasoline. Refining costs, distribution and marketing costs, and state and federal tazxes make up the rest of the retail gasoline price.