Gas prices fall in October, but oil volatility still looms - Yahoo Finance

Gas prices fall in October, but oil volatility still looms

Gas prices are dropping heading into the 2023 fall season. Yahoo Finance's Ines Ferre reports on the disconnect between falling gas prices — citing declining demand and other seasonal factors — and elevated oil prices, while also commenting on potential price spikes if Iran becomes involved in escalating Middle Eastern conflicts.

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Video Transcript

AKIKO FUJITA: And as we talk so much about this disconnect often between oil prices and gas prices, even though they are connected, why the lag this time around?

INES FERRE: Yeah, that's right, they are connected, and if you take a look at where oil prices are today with compared to where they're at-- where they were at last year and where gasoline prices are at today, well, today let's take a look at those gasoline prices. They're at $3.58 a gallon, so we have seen this downward trend when it comes to gasoline. Last month they were at $3.88 a gallon, and last year they were at $3.89, so, in fact, today they are a little bit lower than they were at the same time last year.

Gasoline prices always fall in the autumn. This year, according to AAA, there's no exception to that. Part of this has to do with lower seasonal demand. You've also got lower inventories, down about 10%. Oh, excuse me, higher inventories up about 10% when it comes to gasoline. And then you also have the winter grade, and that is the less expensive type of gasoline that goes into-- during the winter time. So the way that it's made is less expensive, and that will bring down prices.

Even in pricey California, Akiko, prices are coming down, albeit not as much as in the other states. You're still looking at today's average at $5.58 a gallon. A month ago was $5.69. A year ago, it was at $6.06, by the way. Now, California doesn't get as much relief because it has a little bit more of an environmentally friendly type of gasoline blend. Also because of that winter grade, it doesn't come into-- kick into effect until the end of October.

But again, these gasoline prices that we're seeing now on average compared to a year ago, they are lower. Look, the price of oil last week was really volatile. It had been coming down prior to the Hamas-Israel War, and that is because there was concern about demand destruction, concern about a recession, and then you had that conflict, and then so that's where you saw the volatility.

It appears to be that right now the price of oil is pricing in that that Hamas-Israel War will be contained. However, if it does go into-- if Iran somehow gets involved, then you could see prices for oil spike higher. Remember that Iran produces about 3-- more than 3 million barrels a day of oil. If 1 million barrels gets knocked out of the flow within the world, and one analyst was telling me that you can expect oil prices to go up about 20% higher because of that. However, the way it stands now, you can expect gas prices-- if oil continues around this range right now, you can expect gas prices to continue to go down further into the end of the year. Guys.

AKIKO FUJITA: Welcome news for drivers out there who have been paying a lot at the pump. Ines Ferre, thanks so much for that.