Gas prices in U.S., New Mexico finally headed down — but will they stay there?

Analysts say variety of factors has contributed to recent decline

Mike Easterling
Farmington Daily Times
  • Oil prices had remained at more than $80 a barrel for most of the late summer and fall, but they declined to approximately $75 a barrel the third week in November.
  • That was accompanied by a drop in demand for gas of nearly 6% last week.
  • The New Mexico average has declined from $3.36 a gallon on Nov. 18 to $3.35 on Nov. 30 and $3.32 on Dec. 7.

FARMINGTON — It's been nearly a year since the price of gasoline began climbing steadily across New Mexico and the rest of the nation, but drivers finally could be in for some relief at the pump if market trends continue in their current direction.

According to the AAA New Mexico Weekend Gas Watch released Dec. 2, the average price for a gallon of regular unleaded fuel dropped by 1 cent in both New Mexico and the United States from the previous week. While that did not represent a significant decrease, it continued a recent trend and perhaps foreshadowed a more long-term decline in prices that could be driven by a handful of factors, according to Daniel Armbruster, a public affairs specialist for AAA Texas/New Mexico.

Armbruster said fears over the rise of the Omicron variant of COVID-19, coupled with a decline in demand for gasoline and falling crude oil prices, could lead to the first sustained decrease in prices at the pump since they began a steady rise in the middle of December 2020.

"It usually takes a month or so for oil to get to the market," Armbruster said. "And the Biden administration began tapping into the Strategic Petroleum Reserve at the end of November. So that oil should reach the market around the first of the year."

With demand for gasoline falling and oil prices declining slightly, motorists are seeing their first sustained reduction in prices at the pump in nearly a year.

Oil prices had remained at more than $80 a barrel for most of the late summer and fall, but they declined to approximately $75 a barrel the third week in November, according to AAA. That was accompanied by a drop in demand for gas of nearly 6% last week, according to figures from the federal Energy Information Administration, which has resulted in some downward pressure on gas prices.

The New Mexico average has declined from $3.36 a gallon on Nov. 18 to $3.35 on Nov. 30 and $3.32 on Dec. 7. Those prices reflect a similar decline nationally.

Consumers in the Farmington area have not been so fortunate. As Armbruster has said before, gasoline retailers in northwest New Mexico are served by a different supply chain than much of the rest of the state, and the distribution and marketing costs associated with that chain could be different.

Whatever the reasons, Farmington drivers consistently have paid the highest gas prices in New Mexico for the past year — and they continue to do so. Armbruster said the average price for a gallon of regular unleaded in Farmington on Dec. 7 was $3.57 — down only marginally from the $3.58 price recorded on Dec. 1 and 25 cents higher than the latest statewide average.

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Armbruster said even if gas prices do begin to come down more quickly in the Farmington area, it is unlikely they will close that gap on the rest of the state anytime soon.

"Based on trends, Farmington seems to be much higher than the rest of the state," he said. "I don't know why that would change now."

Gas prices typically decline nationally after Labor Day each year as the summer driving season closes and demand falls. That didn't happen this year because of the lifting of many business restrictions associated with COVID-19, keeping demand elevated for a prolonged period.

But market analysts believe the onset of winter finally has begun to drive demand down, and that has helped reduced crude oil prices. Armbruster said the recent emergence of the Omicron variant also has sparked fears of a softening oil and gas market.

"There's a big concern across the globe with the new Omicron variant," he said. "We're encouraging all travelers this year to do their research and make sure you're prepared for every trip."

While Thanksgiving travel increased 9% this year over last year, and AAA officials believe they will see a similar bump for the end-of-year holiday season, Armbruster said those two demand hikes aren't likely to reverse the longer-term trend of falling demand.

"We're looking at it coming right back down after the holidays," he said.

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Another element that potentially could impact global oil prices, and eventually gas prices, is the growing fear of a Russian invasion of Ukraine. Armbruster said that does not yet seem to be a major concern among market analysts, but it could have an impact down the road.

"Russia does play a part in OPEC Plus," he said, referring to the global organization of 15 oil-producing countries. "If supplies were impacted on a global scale, that could impact prices at the pump. But there are a lot of ifs there."

While the recent decline in gas prices is expected to last for at least a few weeks, Armbruster said there is no telling what the trend might be over the long term.

"It's hard to say beyond a few weeks," he said. "Through Christmas, it looks like prices will continue trending downward. Beyond that, what's really important is the global recovery — not from a health standpoint, but an economic standpoint. It was hard to predict gas prices before COVID, and now it's really difficult."

Mike Easterling can be reached at 505-564-4610 or measterling@daily-times.com. Support local journalism with a digital subscription.