SIOUX FALLS, S.D. (KELO) — Over the course of the past several months, gas prices have been climbing continuously. However, in recent days that rise has halted, and prices have started to lower.
This trend is much more noticeable on the national stage than in South Dakota, where price fluctuations have occurred on a smaller scale.
For example, AAA provides the average price of gas on a national, state and (in some places) local level for current day, previous day, the week prior, month prior and year prior.
The one month ago, one week ago, and current day (July 7, 2022) average prices of gas in South Dakota are $4.61, $4.74 and $4.71 respectively.
On the national average, those prices go from $4.91 (Month), to $4.85 (Week), to $4.75 (Current). That’s a fall of 16 cents since one month ago, and a drop of 10 cents in the space of a week.
But are prices really falling? In an attempt to find an answer, KELOLAND News reached out to AAA and spoke with Shawn Steward, the organization’s South Dakota spokesman.
“We’ve kind of been mirroring the national trend of slowly falling gas prices,” Steward said. “The middle of June is where here in South Dakota and nationally, we hit record levels of prices at the gas pumps.”
Since then, Steward says he has seen some slow declines, which he chalks up to falling crude oil prices.
“Crude oil prices make up about 50-60% of what we see in a gallon of gas at the pumps,” said Steward. “That’s really the main driver behind the high gas prices.”
As for why crude prices are falling, Steward points to concerns revolving around a fear of a global economic recession.
To understand the impact oil plays on the economy, it is important to realize the role that the largest players in the oil market — organizations like the Organization of Petroleum Exporting Countries (OPEC), and organizations made up of 13 member states — play in manipulating the global economy.
The game for oil producers such as OPEC is to keep oil prices as high as they can justify, without causing damage to the global economy. “It would not be good for them if there were to be a drop in the demand [for oil] because of a recession,” explained Haresh Gurnani, Professor of Operations and Supply Chain Management at Wake Forest University in a March 2022 interview with KELOLAND.
The question for producers is how far can they push the prices before they hit that tipping point into a recession.
The drop in crude oil prices may indicate that producers feel like they’ve pushed it as far as they can, for now.
“It’s so hard to predict what the price of gas should be or will be,” said Steward. “There’s so many different factors.”
Steward says the $3.06 cent average price South Dakota saw this time last year is likely a long way off. “I would anticipate that consumers should expect gas prices to remain high for some time,” Steward said.
So will this slow decrease in prices continue, or is this simply a ripple in the market? According to Steward, at this point we just don’t know.