The average price for a gallon of regular gas decreased to $3.43, a drop of three cents from the previous week, according to the latest gas analysis by AAA. Prices have dropped despite rising demand for gas and tighter supply, AAA said.
Gas demand increased from 8.59 million barrels per day to 8.96 million last week, according to the Energy Information Administration (EIA). In addition, total domestic gasoline stocks decreased by 6.4 million bbl to 229.6 million bbl last week, AAA reported.
However, recession fears kept global oil prices hovering at near $70 a barrel, according to AAA.
"Increasing demand amid tighter supply would typically push pump prices higher," AAA said. "However, recent lower oil prices have pushed prices down."
The rise in gas demand can be attributed to the start of spring as motorists took advantage of better driving weather, AAA reported.
"We may be seeing a return to seasonal trends in demand with warmer weather and longer days," AAA spokesperson Andrew Gross said in a statement. "But waffling oil prices could mitigate any increase at the pump for now."
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Some parts of the country saw average gas prices fall considerably. Here are the states with the largest drops in average gas prices, according to AAA:
And here are the top 10 least-expensive markets for gas prices this week, based on AAA’s analysis:
Overall, prices are projected to hold steady in the midst of rising interest rates and fears of a looming recession, AAA said.
On Wednesday, the Federal Reserve announced a 25 basis point interest rate increase. The move came despite Goldman Sachs' prediction that the Fed would not increase interest rates so soon after the collapse of SVB triggered a wave of uncertainty across the investment banking sector.
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A recession-triggered drop in demand for gas could affect prices at the pump, AAA said.
"The market is concerned that rising interest rates could tip the U.S. economy into a recession, which would lower oil demand amid reduced economic activity," AAA said in last week’s gas report.
The most recent interest rate hike on Wednesday brought the federal funds rate to a targeted range of 4.75% to 5%, its highest level in 15 years.
"Since our previous FOMC meeting, economic indicators have generally come in stronger than expected, demonstrating greater momentum in economic activity and inflation," Federal Reserve Chair Jerome Powell told reporters at a press conference. "We believe, however, that events in the banking system over the past two weeks are likely to result in tighter credit conditions for households and businesses, which would, in turn, affect economic outcomes."
Moreover, one expert believes current economic conditions and the state of the interest rate environment won’t lead to a major economic downturn like the Great Recession.
"Earlier this month, jobs and inflation data remained too hot for the Fed’s liking," Interactive Brokers Senior Economist José Torres said in a statement. "Investors believe that the path of the current Fed will lead to more regional bank failures and a shallow recession at best."
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