It is the first time WTI has been below $100 since May 11. That was also the last time Brent, which usually trades a bit higher, was below $102 a barrel. Brent hasn’t been below $100 since April 25. Wholesale natural gas futures also fell, nearly 10% for the day at the close, or 36 cents a gallon. The national average cost of a gallon of natural gas at the pump is now $4.80, according to AAA’s latest count, down a penny from Monday and 8 cents from a week ago. Natural gas prices broke above $5 for the first time on June 11th and peaked at $5.02 a gallon on June 14th. Growing fears about the possibility of a recession are the main driver of the latest selloff in oil and gasoline futures, said Tom Kloza, global head of energy analysis for OPIS. Until fairly recently, oil and gasoline investors believed that market forces could not keep prices under control in the short term. “There is now perceived enormous downside risk associated with recession risk,” he said. There have been growing fears of a recession in recent weeks, which has helped lower oil prices sharply. Brent was at $123.58 a barrel on June 8, while WTI was at $122.11. But since that peak, the Consumer Price Index showed consumer prices hitting a 40-year high, one of the key metrics that prompted the Federal Reserve to raise interest rates by three-quarters of a percentage point as a way to combat those price pressures. That raised expectations that the central bank’s aggressive moves to cool the economy could trigger job losses and a recession. Oil and gas prices rose earlier this year after Russia’s invasion of Ukraine prompted the United States and its European allies to impose sanctions on Russian energy exports. suffocating one of the world’s largest producers. But the supply of oil is only one part of the equation that traders consider when bidding on oil futures contracts. Demand is the other part. And nothing kills demand like a recession, which reduces economic activity overall. When people are laid off, there are fewer people driving to work or to the store or to other destinations. The previous time natural gas hit a record high was during the Great Recession, when the national average hit $4.11 a gallon in July 2008. But by the end of that year, it had fallen 60%, to $1.62 a gallon as demand fell. But cheap gas was little consolation for the nearly 3 million people who lost their jobs during those five months. So far, drivers have seen relatively little relief at the gas pump from the recent decline in oil and gasoline futures. The national average natural gas price is down just 4%, or 22 cents, from a June 14 record high, while wholesale natural gas futures have fallen 22% since topping $4.28 a gallon on June 9 . U.S. gasoline retailers have little incentive to cut prices deeper with strong demand for gasoline with the summer driving season in full swing. “There is no compelling reason for retailers to lower their price further with this strong demand,” Kloza said. There could be more price cuts at the pump in the near term — a drop of another 10 cents a gallon next week wouldn’t be a surprise, Kloza said. Gas station owners who pay less for wholesale gas will watch how much of the savings their competitors pass on to their customers before setting their own prices. But the adage that gas prices skyrocket and fall like a feather is likely to be repeated, Kloza said. There likely won’t be any major reductions until schools reopen and the summer driving season ends this fall, he predicted. There are also risks that further developments in Russian oil exports linked to the war in Ukraine or hurricanes battering US oil infrastructure along the Gulf Coast could send prices soaring once again. “I wouldn’t put away the fives used on gas price signs just yet,” he said.
