Explainer: Why gas prices are falling

U.S. consumers are breathing a bit easier now that gasoline prices have come down from record levels, but pump prices are still high, and the two-month slide could be nearing an end.

The nationwide average price for a gallon of gas dropped to $3.99 on Thursday, according to AAA. That's down 20% from the mid-June high, and it's the first time the average has dipped below $4 since early March.

Gasoline prices usually rise and fall with the cost of oil, and crude has also been dropping. The U.S. benchmark price is down nearly one-fourth since early June.

Other factors are also behind this year's roller-coaster ride in energy prices.

WHAT IS HAPPENING?

Gasoline prices hit a record $5.02 on June 14. At the time, U.S. crude was about $120 a barrel and the benchmark international price was even a couple dollars above that. Since then, however, oil prices have tumbled.

Oil prices had been rising since April 2020, as economies around the world recovered from the shock of the pandemic, and reopened — slowly at first, then more rapidly. Demand for energy outstripped supply, pushing prices higher through all of 2021 and early this year. Then in late February, Russia's invasion of Ukraine caused oil prices to spike, and they remained high into June — although not as high as in July 2008 if inflation is considered.

WHY IS THIS HAPPENING?

High energy prices contributed to inflation, which led the Federal Reserve and other central banks to raise interest rates. Concern has increased in recent weeks about the direction of the global economy.

A recession — or even slower growth — hurts energy demand and usually pushes down oil prices. That is the scenario that oil investors now fear.

Even with prices coming down, OPEC on Thursday lowered its forecast of global oil demand for the rest...