The average price for gas in Arizona fell to $3.99 a gallon Thursday, the first time in months it has been below $4 and a sharp decrease from the record high of $5.388 hit just two months ago.
One economist called the falling gas price “a good thing for anybody that drives,” and said the drops are likely to continue into the fall. But others said that while the falling prices of gas is good news, families are still stretched in other parts of their budgets, with inflation running at the highest level in decades.
“While this is welcome news in terms of gas going under $4, at least as of now, there are other pieces of family budgets, more significant pieces of family budgets, that are in a really precarious situation,” said Andrew Sugrue, the director of economic policy at the Arizona Center for Economic Progress.
“Particularly concerning for us are increases in housing costs, which are continuing to rise irrespective of energy price,” he said.
According to the AAA gas price survey, the average cost of a gallon in Arizona Thursday was $3.992, with prices ranging from a high of $4.285 in Mohave County to a low of $3.696 in Pima County.
Nationally, the average price was $3.829, with gas in Hawaii costing $5.30, down to $3.325 in Arkansas.
While that’s nowhere near the $3.117 that Arizonans were paying a year ago this week, it’s well below the all-time highs of $5.388 in Arizona on June 17 and $5.016 nationally on June 14.
Economists said the surge was largely driven by Russia’s invasion of Ukraine, which affected oil supplies and injected uncertainty into the markets, along with the traditional summer rise in gas prices as more people hit the road.
“We had the Russian invasion of Ukraine in March with really spiked oil prices,” said Danny Court, a senior economist at Elliott D. Pollack & Co. in Phoenix. “Then there was a lot of volatility between, basically, March and June where you saw another spike in oil prices in June, and that’s about where the peak of gas prices were.”
Court attributes the recent decline in oil prices to simple supply and demand. The Biden administration has been releasing a “record amount of oil” from the Strategic Petroleum Reserve, he said, combined with fewer people on the road and a slowdown in economic activity in China that is lowering demand for oil.
Ashley Langer, associate professor of economics at the University of Arizona, agreed with Court that the Ukraine-Russia conflict is one of the key factors in oil price uncertainty.
“Gas prices are falling largely because they were high over concerns of what was happening in Eastern Europe,” Langer said. “Now they are coming back toward more of what we would expect of them, absent of that.”
Langer said that gas prices typically fall after Labor Day, with fewer people traveling. She said we can expect prices to fall further but added that there is no guarantee for that sort of “long-run statement.”
“In general, I would expect that trend (of falling prices) to be true,” Langer said. “Maybe even more so this year because there was something keeping gas prices particularly high in the end of the spring and the beginning of the summer.”
The steep jump in fuel prices was one of the main factors behind a surge in inflation over the past year, when the consumer price index rose 8.5%, one of the steepest increases in decades. Gas prices rose 44% from July 2021 to July 2022, according to data from the Bureau of Labor Statistics.
Sugrue pointed to a February poll by State Innovation Exchange and TargetSmart in which 63% of Arizonans said they were “very concerned” with the price of gas, and another 18% “somewhat concerned.”
“Given how car-dependent Arizonans are, the price of gas has been top of mind for Arizonans for a while as they navigate this economy with high inflation and high energy costs right now,” Sugrue said.
But he noted that energy prices are not the only thing that matter to consumers. Other, “more significant,” aspects of family budgets are still on the rise for families that have been feeling the crunch since the beginning of the COVID-19 pandemic.
“We have this economic shock that was the COVID-19 pandemic, where a lot of people are out of work or are not able to earn,” Sugrue said. “They are facing more economic pressure today than they were back in 2020.”
Besides rising fuel prices, the BLS consumer price index said costs over the past year rose by 10.9% for food, 5.7% for housing, and 5.1% for clothing, among other costs.
Court agreed with Langer that gas prices are likely to continue down in the near future, particularly considering how high they were, to begin with. While some of the factors driving down prices may already be “baked in” as summer winds down, he said the element of uncertainty could accelerate those changes – or slow them down.
“There’s just so many other dynamics going on too,” Court said. “We have one of the largest nations, with China, that sort of has lower economic activity. Oil prices are very vulnerable to economic activity. If China slows down, that’s a drop in oil demand and oil prices will drop. That’s a drop in gas prices.”