Relentless inflation means motorists are still stressed about gas even as prices fall

“The price is so high that people have to think very carefully about where they’re going,” said Stowe, who had just volunteered at a pantry. “People are in trouble, and that’s the truth.”

Though drivers in the US, Europe and elsewhere are getting a break from the sky-high gas prices they endured over the summer, the cost is still difficult for many grappling with unrelenting inflation. The US average was $3.19 a gallon, down from a record $5 in June, while European Union pump prices have fallen almost 40 cents since October to $6.58 a gallon.

Drivers are now hoping the situation will not worsen after a spate of cuts linked to Russia’s war in Ukraine, accidents and the slowing global economy have strained the world’s oil supply. While oil and gasoline prices have fallen despite a recent supply crisis, these threats could push up costs this winter.

What’s in store for the world?

— An EU ban on imports of most Russian oils came into effect last week.

– At the same time, the leading democracies of the Group of Seven and the 27 nations of the EU have capped the price of Russian crude oil to $60 a barrel for other countries.

— A major leak occurred along the Keystone pipeline in the United States, halting oil supplies along a large corridor.

— Dozens of oil tankers were stuck in Turkey for days.

— The coalition of oil producers OPEC+ has cut production.

“The global system can probably withstand these outages for a few more days, but if they continue, they will play an important role in price increases,” said Claudio Galimberti, Rystad Energy’s senior vice president of analysis.

A key reason oil supply restrictions haven’t pushed prices higher: Traders believe there will be less demand for oil in the future amid fears the global economy is slipping into recession, which means less motoring and production would. And some investors worry that China’s looser COVID-19 restrictions could backfire on the country’s economy.

“It can quickly become a major COVID wave that engulfs hospitals and then impacts demand worse than COVID policies,” Galimberti said.

Restrictions on Russian exports are likely to have a bigger impact on oil prices next month. Although western nations have banned Russian oil, customers in India and China are buying it, so there is enough oil on the market for those who need it. More than 97% of Russian crude oil exports went by sea to China and India last month, according to Refinitiv, a provider of financial markets data.

“We do not require our companies to buy Russian oil. We urge them to buy oil,” Indian Foreign Minister Subrahmanyam Jaishankar said in parliament last week. “But it’s a sensible policy, in the interests of Indians, to go where we can get the best deal and that’s what we’re trying to do.”

Global oil supply could become more limited in February as European nations cannot buy Russian refined products like gasoline and diesel, so Russia could cut oil production.

“So far there hasn’t been a big drop in Russian production. But as soon as Russia cannot export products to Europe, they will have to reduce production and that will lead to a shortage of supplies, which will most likely be reflected in prices,” Galimberti said.

Russia could also decide not to produce oil due to the G-7 price cap. His oil is now selling for less than that. But if the price rises and nears the cap, Russia may decide to withdraw oil from the market, analysts said.

“There’s still a shoe to drop on that front,” said Kevin Book, managing director at Clearview Energy Partners.

The price cap will secure a discount on Russian oil, especially given the $100 a barrel Russia earned just months ago, White House press secretary Karine Jean-Pierre said.

“We are focused on constraining Putin’s ability to profit from rising prices to fund his illegal war while promoting stable global energy markets,” Jean-Pierre said. “This is not about Russian oil from the market. This is about the cap – the cap at this level maintains clear incentives for Russia to keep exporting, and we believe that should be the case.”

International-standard Brent crude oil was selling for about $82 a barrel on Thursday. According to forecasts by the US Energy Information Administration, this is expected to increase to an average of US$92 per barrel over the next year. That’s still under $125 seen this summer.

When it comes to prices at the pump, they’re lower than last year, but Americans have been paying $2 to $3 a gallon for most of the last decade, according to AAA data.

In the EU, where taxes make up a larger part of petrol costs, prices fell to 1.70 euros per liter ($6.58 per gallon) from 1.80 euros per liter ($6.96 per gallon) in the first week of December In late October, according to the bloc’s executive commission.

The recent drop in prices combined with freezing cold weather has kept Aria Razdar, 28, at the wheel of his BMW hatchback in Frankfurt, Germany. During the summer price spikes, he rode a Vespa scooter to work and school, but gas prices fell and so did the temperature.

“Right now the prices are a bit cheaper – actually they’re still high, but in comparison,” said Razdar, a childcare worker who wants to be a teacher, as he finished refueling in a freezing wind.

He spent a little less than 30 euros ($32) on fuel for the week, a cost he could manage for the convenience of driving 12 minutes to work instead of spending 45 minutes on public transit.

Others also wanted lower prices.

Gary Schwuchow, a retired maintenance manager, said he drives less and saves money because he lives off his pension and Social Security payments.

“I used to fill up the tank for $40 or $42, and now it’s almost $60,” he lamented as he filled up his Nissan Sentra at a gas station in Yonkers, New York, where a gallon of regular gas sold for 3.79 $. “I don’t fill it anymore. I deposited $25 each.”