Gasoline prices fall as weakening demand sends refining margins crashing

• Gasoline prices have been falling amid weakening seasonal demand, driving refinery margins lower.
• Margins have plummeted from more than $40 a barrel to less than $10, Bloomberg reported.

As winter approaches, it's chilling gasoline prices, too.

Despite soaring oil prices stoked by the Israel-Hamas turmoil, gas prices are maintaining their decline as the US shifts to cheaper winter blends and a decline in demand following the summer driving season.

Gas prices were at $3.575 a gallon on Wednesday, according to AAA, down from $3.584 a day ago and $3.881 a week ago.

In under two months, gasoline margins have plummeted from more than $40 a barrel to less than $10, according to Bloomberg data on Monday, in a return to pre-pandemic levels.

At the same time, the supply side is also pressuring margins lower. According to US Energy Information Administration data, gasoline inventories dipped 1.1% last week, but are up 6.7% from a year ago.

Because gasoline is made from crude oil, anything that affects the crude oil markets tends to affect gas prices, just like it did when the Russia-Ukraine crisis hit last year.

While Israel and Hamas are not major oil producers, an escalating conflict could drive crude oil prices higher, which would change the story for gas prices.

Oil prices flared up again Wednesday after a devastating explosion at a hospital in Gaza fueled investors' fears that the ongoing crisis could expand as Iran called for cutting off oil supplies to Israel.

Brent crude futures rose 1.6% to $91.35 a barrel. But further upside may be limited as an earlier surge that put oil near the $100 mark weakened global demand and eventually sent prices back down.