Fears of a global economic slowdown have sent oil prices tumbling recently, less than a month after the national average price of gas in the U.S. reached $5 a gallon for the first time.
Since they hit the milestone the week of June 13, average weekly gas prices have fallen to about $4.75, according to AAA.
The price of worldwide benchmark Brent crude oil fell to about $104 a barrel Thursday, down from nearly $115 last week and well off the highs of nearly $140 briefly reached in March.
Central banks around the world, led by the U.S. Federal Reserve, have been seeking to curb inflation by aggressively raising interest rates. Monetary policy officials hope the higher rates will help cool demand by making it more expensive to borrow money — all while avoiding a recession, an outcome observers say is far from guaranteed.
"All this talk of [higher] interest rates and recession — that's fear, the oil market is reacting on fear," AAA.com spokesperson Andrew Gross said. "It's kind of like the stock market: You have these incredible swings, when it sees rising rates or talk of recession, a global recession, that means an economic slowdown, which means less oil is being consumed. That's bad news for the oil industry. And that’s why prices have been dropping.”
Some analysts expect prices to fall further. Patrick De Haan, a vice president at the gasoline price tracking website GasBuddy.com, tweeted Thursday that recent oil price plunges could bring gasoline prices down to as low as $4.50 per gallon.
Oil industry analyst Andy Lipow said in a note to clients this week that gas prices could go even lower, at the cost of an overall economic slowdown. That's assuming a hurricane doesn’t affect oil markets, he said.
"I have been through six oil price crashes during my career in the oil industry, a recession could trigger a seventh," he wrote.
Because of Russia's invasion of Ukraine, oil traders aren’t accessing Russian oil supplies, creating a shortage that has helped push prices higher this year. A recession, Lipow said, could reverse the trend.
"The consumer would get cheaper gasoline at the expense of a slowing economy," Lipow said.