In L.A. County, the average price of gasoline recorded its largest decrease since October 2022, dropping 6.2 cents to $6.083.
NEW YORK -- After spiking to alarming levels just last week, oil prices are suddenly in free-fall mode. The dramatic reversal should bring relief to drivers (and nervous central bankers) very soon.
US oil prices plunged by 5.6% to $84.22 a barrel on Wednesday, marking the biggest one-day decline in a year. Crude dropped even further Thursday, sinking as low as $82.24 a barrel, a five-week low.
This is quite the U-turn, even for the notoriously boom-to-bust oil market. As recently as last week, US crude briefly touched $95 a barrel and Wall Street banks were predicting $100 or higher amid Saudi Arabia and Russia's aggressive supply cuts.
Now, gas prices are already starting to retreat and experts predict sharper drops to come.
In Los Angeles County on Friday, the average price of a gallon of self-serve regular gasoline recorded its largest decrease since October 2022, dropping 6.2 cents to $6.083, decreasing for the seventh consecutive day.
The average L.A. County price has dropped 23.2 cents over the past seven days, including 5.1 cents Thursday, according to figures from the AAA and Oil Price Information Service. The decreasing prices follow a run of 23 increases in 25 days totaling 91.8 cents that boosted the average price to its highest amount since Oct. 11, 2022.
The national average for regular gas dipped to $3.77 a gallon on Thursday, according to AAA. That's 11 cents below the 2023 peak set last month when gas prices experienced an unusual post-Labor Day jump.
Gas prices will tumble to nearly $3.50 a gallon nationally over the next few weeks, Andy Lipow, president of consulting firm Lipow Oil Associates, told CNN.
Tom Kloza, global head of energy analysis at the Oil Price Information Service, told CNN he expects an even bigger tumble - to as low as $3.25 a gallon by Halloween. Pointing to sinking wholesale prices, Kloza said retail prices should drop each day by between 1.5 cents and 2.5 cents a gallon going forward.
"People at cocktail parties will finally be talking about gas prices in a good way," Kloza said in a phone interview. "No doubt, it's welcome news for the consumer portion of the economy."
Such a drop in gas prices would mark a significant break for consumers exhausted by the high cost of living and soaring borrowing costs.
It would also come as a relief to officials inside the White House and Federal Reserve who nervously watched the recent jump in oil prices and considered the damage it could do to consumer confidence and inflation. Indeed, the recent jump in gasoline prices almost single-handedly caused inflation to heat up last month.
"Gas price disinflation is probably going to be the story for the rest of the year," Kloza said.
Joe Brusuelas, chief economist at RSM, wrote in a report on Wednesday that the drop in oil and gasoline prices will help convince the Fed to keep interest rates steady at its next meeting, which concludes on November 1.
So why did oil prices go from spiking to plunging?
Some argue that oil bulls, including hedge funds, had become excessively bullish. Egged on by Saudi Arabia's supply cuts, they piled in to make bets that prices would go higher and higher - even though fundamentals didn't justify it.
"A lot of speculative pressure is being let out of the tires," said Matt Smith, lead oil analyst for the Americas at Kpler. "It was stretched taut like a rubber band, hence a couple of bearish triggers caused price to snap back in short, sharp fashion," Smith said.
The latest trigger was a government report released Wednesday that showed gasoline inventories unexpectedly soared last week. That in turn raised concerns about weakening demand for gasoline.
Kloza dismissed as "premature" the argument that the weekly government data revealed an ominous plunge in demand that signals underlying weakness in the economy. He said gasoline demand is roughly where it was last year and stressed the weekly numbers can be volatile.
Of course, it's worth noting that the situation in the oil market can change in the blink of an eye, as the past week demonstrates.
There's always a risk that more aggressive steps by OPEC+ to cut supply or disruptions caused by Russia's war in Ukraine could cause oil and gasoline prices to move higher again.
Kloza said he is expecting prices at the pump to rebound early next year as demand from drivers returns and refineries struggle to keep up.
"Enjoy the next four or five months," Kloza said, "and then be prepared for the roller coaster to go back up next spring."
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