Oil prices dipped last week as recession fears begin to fade. The national average price for a gallon of gas slipped slightly by three cents to $3.47, according to data released by AAA.
The organization ties oil's lower prices to the decision made by OPEX+ to continue at its current production levels and not make any cuts. And crude oil prices also dropped last week, which could case lower gas prices at the pump. However, Friday’s job report indicated the economy added more than 500,000 jobs, which may reverse that course, AAA said in its report.
"Keep an eye on the price of oil," AAA spokesperson Andrew Gross said in a statement. "Because oil currently accounts for nearly 60% of what we pay at the pump. And rising or falling oil prices can have a direct impact on motorists’ wallets."
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ANOTHER WEEK OF HIGHER GAS PRICES SHOWS NO SIGNS OF SLOWING: AAA
Following a year characterized by record-high inflation and economic volatility, some reports indicate the economy is recovering. Gross domestic product (GDP) increased by 2.9% annually in the fourth quarter of 2022, according to the first advance estimate released by the Bureau of Economic Analysis (BEA). That followed growth from the third quarter when GDP increased 3.2% annually, the BEA reported in December. For some, the news eased fear of an upcoming recession.
But while gas prices have dipped in recent weeks, the trend may change course.
"For the first time in 2023, the national average price of gasoline has seen a weekly decline, primarily thanks to a sharp and sudden drop in the price of oil," Patrick De Haan, GasBuddy head of petroleum analysis said in a statement. "While the decline in both gasoline and diesel prices is terrific, it’s not unusual to see prices falling in February, which tends to be the month with some of the lowest gasoline prices of the year thanks to seasonally weak demand.
"For diesel, we’re likely to see more declines, and potentially much more significant ones in the weeks ahead as imports of distillate have accelerated, leading to a sell-off," De Haan continued. "And, with warmer weather ahead, demand may struggle as well. However, especially for gasoline, high levels of coming maintenance and the eventual transition to summer gasoline could lead today’s declines to reverse down the road. For now, motorists should enjoy the decline, but be wary as we’re likely to eventually see increases again down the road."
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JOB GROWTH SURGES IN JANUARY, REVERSING SLOWDOWN TREND OF PAST MONTHS
Even though the nation enjoyed slightly lower gas prices at the pump week, their overall auto costs are going up. As a result of high inflation and an increase in traffic accident rates, drivers saw their car insurance costs rise by 9% to $1,777 per year in 2022, according to Insurify's 2022 in review and what's ahead for 2023 report. Insurify projects that drivers could see a 7% increase in insurance costs this year.
And rates are on pace to rise 8.9% in 2023, according to a report by The General. But inflation is not the only factor pushing up auto insurance costs.
"Shortages of parts and new vehicles, waves of retiring mechanics, and deadlier roadways are changing the automotive insurance landscape for insurers and you – the driver," The General said in its report. "That’s on top of the fact that the value of new vehicles has skyrocketed since 2020, charting their largest gains in 2021 as Americans returned to offices, restaurants, and social events again, pushing up demand for both new and used vehicles."
The auto mechanic industry is also affecting auto insurance costs, according to The General. As more mechanics retire, the industry needs to fill roles, which are increasingly becoming more technical and require higher pay.
"The workers who put your car back together after a wreck command more wages as the veteran trade workers who retire from the workforce," The General said in its report. Dealerships and lobbying groups have struck partnerships with schools and nonprofits in recent years to train the next generation of auto technicians. Their jobs have become increasingly technologically advanced as cars are loaded with more computer parts."
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ANOTHER WEEK OF HIGHER GAS PRICES SHOWS NO SIGNS OF SLOWING: AAA
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