Gasoline prices have dropped 80 cents per gallon in the last two months, with prices outside large cities poised to go below $4.00 per gallon as early as this week. But with crude oil prices stabilizing, there is a limit to how much lower the price of products made from that crude can fall.

First things first: despite all the finger-pointing at oil companies, variations in the price of a gallon of gas tend to track the variations in the price of a barrel of crude oil fairly closely. Following are two charts showing Energy Information Administration data. The first chart shows the spot price (not the futures contract price, but the actual cash changing hands upon delivery in Cushing, Oklahoma) of a barrel of crude oil, and the second chart is the average price of a gallon of gasoline purchased at the pump (all grades, all formulations), from January 2020 to last week.

The recent peak for the spot price of crude was the week of June 6-10, when it averaged $120.43 per barrel at Cushing. That was also the week that nominal gasoline prices (all grades, all formulations) peaked, at $5.11 per gallon. Since then, the spot price of a barrel of crude is down has dropped by almost $21 per barrel, to $99.60 at Cushing last week – a 17 percent decrease.

And the price of the average gallon of gasoline at the pump has decreased by 81 cents per gallon in that same period, a decrease of….wait for it…16 percent. (Diesel is only down 10 percent from the early June peak, and is still almost a dollar more expensive than non-reformulated gasoline.)