You can be on Entrepreneur’s cover!

Gas Prices Are Dropping After a Summer of Sticker Shock at the Pump. Here's What You Need to Know. Planning that dream trip has been complicated, but things are looking up.

By Amanda Breen

entrepreneur daily

Many hopeful vacationers have been considering their options this summer — some enthusiastic about their first real chance at travel after more than two years of pandemic-induced lockdowns and restrictions.

But planning that dream trip has been complicated, between exorbitant airfares, rising vacation rental scams, and, of course, increasingly high gas prices.

Fortunately, it seems like things may finally be looking up — because gas prices are going down.

Why are gas prices dropping?

Gas prices have begun to fall in several places across the U.S.

According to AAA, the national average price per gallon is $4.16, down from last month's record of $5.01. Although some states do continue to see higher-than-average prices, 46 states and the District of Columbia have seen declines — and that downward trend may continue.

Why are gas prices going down? Per Reuters, there are a couple of factors at play: a decline in global fuel demand because of the high prices and the strong U.S. dollar upping the cost of oil elsewhere.

Though drops are still expected for the next few weeks, the situation is unpredictable, so take that summer road trip while you can.

Original story below published June 1, 2022.

What is the average U.S. gas price?

Per AAA, the national average for regular gasoline rose by five cents on Wednesday to an all-time high of $4.67 a gallon. That means that, in the past month alone, average gas prices have increased by 48 cents, and a tank of gas now costs 32% more than it did on the day prior to Russia's attack on Ukraine.

Illinois has also become the seventh state to join those with gas price averages at $5 or higher, according to AAA, with New York and Arizona mere pennies from that milestone as well. Georgia now boasts the lowest average gas price at $4.16 a gallon, and California has the highest at $6.19.

Related: Shell Rakes in $9.1 Billion in First Quarter. What Does It Mean for the Rising Cost of Living?

Why is gas so expensive?

The price of gasoline largely boils down to supply and demand, reflecting not only the cost of acquiring and refining crude oil, but also the cost of distribution, marketing and taxes.

Part of the explanation for increasingly high gas prices lies with Russia's invasion of Ukraine. World leaders pursued economic retaliation against Russia back in February, and the impact on crude oil prices was immediate; they reached triple digits for the first time since 2014. The loss of Russia's supply also increases exports from the U.S. and Canadian refineries that typically supply Eastern U.S. gas stations.

"With the cost of oil accounting for more than half of the pump price, more expensive oil means more expensive gasoline," Andrew Gross, a spokesperson for AAA, said in a statement per NBC News. "These prices are creeping closer to those record high levels of early March."

Of course, rising oil prices also contribute to inflation, which was up 8.5% year over year in March — its fastest increase in 40 years.

Related: DoorDash Is Paying Back Drivers to Offset Gas Prices — Without Charging Customers

How high will gas prices go?

A couple of weeks ago, JPMorgan analysts predicted how much gas prices would climb this summer, and the estimates were far from optimistic. "With expectations of strong driving demand...U.S. retail price could surge another 37% by August," the firm's report states, per CNN.

According to Patrick De Haan, an analyst for Gas Buddy, which tracks fuel costs across the country, the national average gas price could top $5 a gallon as early as June 17. Still, others are hesitant to say the national average will definitely cross over the $6 a gallon mark.

"It's hard to get to $6," Andy Lipow, president of Lipow Oil Associates, told CNN. "Before we get there, we would have significant demand destruction, not only here, but around the world."

Related: 'A Perfect Storm': Average U.S. Gas Price Reaches New High and Continues to Climb

Amanda Breen

Entrepreneur Staff

Senior Features Writer

Amanda Breen is a senior features writer at Entrepreneur.com. She is a graduate of Barnard College and received an MFA in writing at Columbia University, where she was a news fellow for the School of the Arts.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Side Hustle

This Insurance Agent Started a Side Hustle Inspired By Nostalgia for His Home State — Now It Earns Nearly $40,000 a Month

After moving to New York City, Danny Trejo started a business to stay in touch with his roots — literally.

Making a Change

Invest in Professional Development with 1,000+ Courses for an Extra 20% Off

Get lifetime access to StackSkills Unlimited and save more than $500 off for a limited time.

Leadership

3 Reasons Employees Are 'Quitting Your Leadership' and Becoming Less Productive, According to a Senior People Scientist

Heather Walker, senior people scientist at employee experience platform Culture Amp, breaks down the current workplace reality.

Growing a Business

7 Passive Income Ideas to Make Money and Build Wealth in 2024

Looking to start a side hustle for some extra money in 2024? Check out these seven internet-based home businesses to get you motivated.

Business News

'This Woman Got Robbed': Fans Furious After 'Wheel of Fortune' Contestant Loses Round

The January 30 episode of the show featured a contestant named Megan Carvale.

Business News

Elon Musk Says AI Technology Will Be Smarter Than 'Any Human' By 'Next Year'

The billionaire spoke about the rapid advancement of the technology in a livestream interview on X.