After lagging behind the rest of the nation for several weeks, average gas prices in New Jersey finally dropped below $4 a gallon Friday. It’s the first time they’ve been that low since March.
On Friday, AAA reported the statewide average price for a gallon of regular dropped to $3.99 after stubbornly remaining higher than the national average — which dipped below $4 on August 9 — for several weeks.
“Break out the champagne,” said Robert Sinclair, a AAA Northeast spokesman, who tracks gas prices. “Gasoline prices are following crude oil prices lower, which continue to drop due to investors worried about global inflation and with it, lower demand for petroleum products.”
Crude oil prices roller coastered up and down on commodities markets through August before settling on a price of $92 a barrel on Thursday, NASDAQ reported.
Adding to the lower demand for gas was a cause and effect of high gasoline prices which peaked in mid-June, resulting in drivers staying close to home, he said. Remember one year ago, the average for regular was $3.18 a gallon, AAA reported.
“This corresponded with AAA survey results from March where 60% of drivers said $4 per gallon was the pain point and 75% said $5 was the pain point,” Sinclair said. “The main reaction to higher prices? Drive less.”
What took New Jersey so long to follow the national price drop was the lack of oil refining capacity in the Northeast, meaning that gasoline has to be shipped from somewhere else, said Patrick De Haan, GasBuddy.com head of petroleum analysis.
“The Northeast continues to be dogged by refinery issues and imports and has struggled as of late,” he said. “It’s the supply issue and import levels not being adequate. You’ll pay until it’s solved.”
The permanent closure of a Philadelphia-based refinery after a fire and the shutdown of a Canadian refining plant due to COVID-19 outbreak are among the reasons New Jersey and Northeast gas prices stayed higher, De Haan said.
Besides shipping gas from other regions of the country, the Northeast also imports gasoline from Europe, contributing to higher prices here, he said. Adding to price pressure is the region is required by the U.S. EPA to use pricier reformulated gas to reduce air pollution during the summer, he said.
State gas taxes are less of a factor because they don’t change as frequently, he said. However, New Jersey’s gas tax rate does change based on whether it meets an annual target of $2 billion in revenues to fund the state Transportation Trust Fund.
In August 2021, state officials announced an 8.3 cent per gallon cut in the gas tax rate, which took effect on Oct. 1, 2021. Despite that reduction, drivers complained that they didn’t see the reduction in pump prices.
While $3.99 is the average price, GasBuddy.com reported 15 gas stations in the state with prices ranging from $3.49 a gallon to $3.63. Gas Buddy uses a combination of crowd sourcing and gas station surveys in price reporting.
Even name brand stations could be found selling under the $3.99 mark, including a mini price war seen on Route 27 in Iselin where a Shell was selling regular at $3.75 cash, a nearby BP priced it at $3.76 a gallon and a Delta had a $3.71 per gallon price on Thursday.
Could prices go lower? That depends on nature, global politics and driving, experts said.
“I see more downward pressure. It’s a question of nature and whether we see hurricanes, and geo-political tensions,” De Haan said. “Prices should fall because summer is in its final innings and the switch to winter blend gas happens in three weeks.”
Besides a gulf coast hurricane season that could affect refineries and oil drilling rigs, the Organization of Petroleum Exporting Countries, OPEC, could take action that would put the brakes on price drops.
“It could be offset by OPEC, who this week said it wants to...reduce (oil) production because of the global economy,” he said. “That’s one of the wild cards.”
Experts doubted the price drop was significantly impacted by the upcoming mid-term elections in November.
“Political manipulation can not do much to affect prices,” Sinclair said. “If there were a sudden cessation of the war in Ukraine, that would go a long way to restoring political and market stability and lower prices, but that seems a long shot right now.”
Gas price fluctuations are cyclical, based on the time of year and increases or decreases in driving, which influence demand, De Haan said. Prices increase in the spring, rise through the summer with vacation season and drop off in fall and winter, when people drive less, he said.
“Market forces always override people’s feelings and beliefs,” De Haan said. “Cyclical demand is higher in spring than in the fall.”
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Larry Higgs may be reached at lhiggs@njadvancemedia.com.
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