Will Gas Prices Go Down in July?

Gas prices have hit record highs in recent months, sparking talk of tax holidays and a spat between President Joe Biden and U.S. oil companies over who's to blame.

On June 17, prices stood at $5 a gallon. A week later, the national average had dipped to $4.926, according to the American Automobile Association. Californians are still paying the most for gas, at $6.345 per gallon, the AAA said. Georgia had the cheapest average price at $4.427.

Does this small reduction mean the worst is over? Will gas prices fall further in July—and when can Americans grappling with inflation at a 40-year high expect to see significant savings at filling stations?

Man filling his tank
Stock image of a man looking shocked at gas prices while filling his tank. The highest prices are found in California and the lowest in Georgia, according to the AAA. Getty Images

Will Gas Prices Go Down in July?

The retail cost of fuel is typically driven by crude oil supply and prices, refinery capacity, local competition and consumer demand. At the moment, COVID-19 and the war in Ukraine are also having an impact.

Although coronavirus lockdowns have ended in the U.S., the pandemic's effect on supply and demand is still being felt. Meanwhile, the sanctions imposed on Russia by the U.S. and the European Union, as punishment for invading its neighbor, have forced Moscow to find new customers for its oil and gas, as well as causing big ructions in world markets.

The war shows little sign of ending soon but oil industry experts are predicting that, even without a peace deal, U.S. gas prices should fall as the summer ends and demand becomes more stable.

Gabe Ortega, fuel pricing practice leader at PDI Software, told Newsweek that prices would go down—but not significantly and not just yet.

"It's hard to see the case for prices coming down in a meaningful way in July," he said. "Crude oil remains above $100 per barrel, refineries are running near capacity, consumer demand will remain high in the peak summer months and local retail competition may be dampened by pressure on retail unit margins.

"About the only thing that could push prices down would be intervention from federal, state and local governments. If they all choose to suspend fuel taxes, that could result in immediate relief at the pump—as much as 50 cents per gallon."

The President's Plan for a Gas Tax Holiday

The president is calling for a three-month "federal gas tax holiday." A White House statement issued on June 22 said the tax, which is 18 cents per gallon of gas and 24 cents for diesel, should be suspended "for three months—until the end of September—to give Americans a little extra breathing room."

The White House also pointed out that some states, including New York, have suspended their gas taxes or are working on other measures to help struggling consumers.

However, Ortega warned that Biden's proposal was a "tough sell" because the revenue from fuel taxes is a significant source of income for the government, spent on maintaining roads and highways. Transport and infrastructure groups have already expressed their opposition to the plan.

The Senate's Republican leader, Mitch McConnell, has branded the idea an "ineffective stunt." It has been criticized by Democrats too. Senator Tom Carper, who represents Biden's home state of Delaware, posted a tweet on June 22 calling the proposal a "shortsighted and inefficient way to provide relief." Other options should be explored, he said.

Back in March, House Speaker Nancy Pelosi questioned whether consumers really benefited from gas tax holidays because "the oil companies do not necessarily pass that on to the consumer … You cannot write a law that requires them to pass it on."

At the time, Pelosi suggested that gas rebate cards or direct payments to Americans would work better.

How Long Are Gas Prices Going To Remain High? How High Can They Get?

Ortega said: "Barring government relief from fuel taxes, we ought to remain at elevated levels through the summer driving season, which traditionally ends with Labor Day in September."

He believes we're now "at or near the peak," with prices hovering around the $5 mark.

Average prices should remain within a "tight range," he added, but could spike "if there are any further disruptions to supply due to hurricanes, pipeline problems or any new geopolitical upheaval, particularly in the Middle East."

When Can We Expect Prices To Drop?

The end of the driving season typically brings a drop in gas prices and Ortega expects some relief in September "whether there is government intervention or not."

He also pointed to two recent examples of peaks being swiftly followed by falling prices—in 2008 and in 2020. "In 2008, we reached an all-time high of $5.41 per gallon when adjusted for inflation. Then the economic downturn took place and within two months premium-grade fuel was selling below $2 per gallon.

"It's one anecdote and does not predict the future," he said, "but does provide an analog that shows what has happened in the past during a similar circumstance. I play this back often to remind myself that there is hope for relief on the horizon."