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Gas prices could soon drop to $4 a gallon, Biden energy adviser says

Gas prices drop across U.S.
Gasoline prices continue to drop across the U.S. 02:46

Gasoline prices in the U.S. could soon drop to an average of $4 a gallon, according to a Biden energy adviser. 

That forecast comes as prices at the pump, which hit a record of $5.02 a gallon on June 14, have steadily dropped over the past month. The average national price now stands at $4.52 a gallon, 43% higher than the typical price paid by drivers a year earlier, data from AAA shows.

Relief for motorists could help alleviate the financial pain being felt by households across the U.S. amid the sharpest inflation in more than four decades. Even though fuel prices are coming down, drivers in states such as California and Idaho continue to pay an average of more than $5 a gallon. 

Amos Hochstein, the special presidential coordinator for international energy affairs, told CBS News' Margaret Brennan on "Face the Nation" on Sunday that he expects gas prices "to come down more towards $4."

Hochstein added, "And we already have many gas stations around the country that are below $4. This is the fastest decline rate that we've seen against a major increase of oil prices during a war in Europe where one of the parties in the war is the third largest producer in the world."

This weekend, the most common gas price in the U.S. was $3.99 per gallon, according to GasBuddy head of petroleum analysis Patrick De Haan. 

"So far, we've seen the national average drop for 34 straight days, with over 25,000 stations now back at $3.99 per gallon or less, and thousands more stations will join this week," De Haan wrote in a blog post about the recent dip in gas prices. "Barring major hurricanes, outages or unexpected disruptions, I forecast the national average to fall to $3.99/gal by mid-August."

"First cracks" in gas demand

Several factors are pushing down gas prices after they peaked in June, according to experts. First, Americans are driving less due to the hit to their budgets. Consumers purchased less gasoline in the second quarter of 2022 and early July compared with the same period a year earlier, according to the U.S. Energy Information Administration. 

"Crucially, demand growth will be increasingly sensitive the higher the prices go, and the first cracks in the U.S. gasoline demand are now visible," JPMorgan analysts wrote in a research note earlier this month. 

Second, crude oil prices are sensitive to economic concerns, and rising fears of a global recession have dented oil prices as a result, according to energy analysts at political risk consulting firm Eurasia Group.

"There's never one reason why oil prices go up or why oil goes down," Hochstein told CBS News. "As you know, when oil prices go up, they tend to say there's only one reason, and that's the political leadership."

U.S. families struggle as inflation and gas prices soar 02:27

Hochstein also pointed to the Biden administration's decision to tap the nation's Strategic Petroleum Reserve earlier this year in an effort to help lower prices. "Over the last few months, the president has supplied the U.S. market with a million barrels a day, which is a historic level," he noted. 

Hochstein said U.S. oil producers need to ramp up production to meet the demands of consumers and businesses, while noting that any increase won't be immediate. 

"The private sector, as we talk to them in the United States, said they can increase production in the United States by about a million barrels a day, but it's going to take time to invest in it," Hochstein said. "It will come at the end of the year."

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