With a price cap on Russian oil possibly being announced as soon as Wednesday, market experts are weighing in on how it would impact U.S. gas prices during one of the busiest travel seasons of the year.
"I want to steal a line from National Lampoon: It's a stupid and futile gesture, and it doesn't make any sense because price caps absolutely do not work," FOX Business contributor and Price Futures Group market analyst Phil Flynn said on "Varney & Co." Wednesday. "In fact, many times, they have the exact opposite effect."
Flynn made his strong stance against the Group of Seven (G7) nations’ price cap consideration while the U.S. national gas average reached its lowest levels in 268 days, GasBuddy head of petroleum analysis Patrick De Haan pointed out earlier in the show.
G7 nations are looking at a price cap on Russian seaborne oil in a range between $65 to $70 per barrel in response to concerns around top crude importer China, which announced tighter COVID-19 restrictions late Tuesday, Reuters reported.
"We're watching continued challenges in China with COVID, that is pushing oil prices down significantly as China acts to shut down its economy, which limits oil consumption," De Haan said. "In the last week, [seeing] some of the biggest drops now – prices in Wisconsin down $0.24, California down $0.23 in the run-up to Thanksgiving."
But Flynn warned a price cap could backfire, and reverse the recent downtrend in national gas prices.
"Countries can't even agree on what's a fair price for oil… If you come in with the price that's too low or too high, you're either going to restrict supply, or the price cap isn't going to have any impact at all," Flynn explained. "But at the end of the day, the one thing that I can tell you is that when you put a price cap into place and demand surges, and you don't have that supply, the prices are going to go up, and you're going to see shortages."
He continued saying that the G7 countries "should know better," and prepare for the possibility that a price cap may not have its intended effect.
"If Russia's still able to sell some oil, and if we're going to be able to move around the price cap because there's going to be certain countries that won't agree to it, such as China, for example, then this oil is still going to go out," Flynn argued. "I'm afraid that Russia is going to teach them a lesson about price caps."
GasBuddy’s De Haan went on to say that the current low gas prices could inspire last-minute travelers to hit the road this Thanksgiving.
"While not as many Americans are hitting the road as [in] 2019, more are than last year. But the last-minute travelers that jump in the car and say, ‘Hey, gas prices are down $0.25, I'm feeling a little bit better,’ the number of those travelers could jump up as gas prices continue to drop," De Haan said.
A recent GasBuddy analysis found that 20% more Americans are planning road trips this holiday season compared to last year.
"Everyone will be seeing relief at the pump this week, with even more substantial declines on the way as oil prices plummeted last week to briefly trade under $80 per barrel," De Haan previously said in a statement. "It's not impossible that if oil markets hold here, we could see a national average of $2.99 around Christmas, certainly the gift that every motorist is hoping for."
"Drivers shouldn't be in a rush to fill up as prices will come down nearly coast-to-coast into the heavily traveled Thanksgiving holiday," he continued.
FOX Business’ Nora Colomer contributed to this report.