As the holiday season approaches, there’s good news for U.S. drivers—the national average gas price is at its lowest point all year. Analysts are optimistic that by Christmas, the cost per gallon could dip below $3 for the first time since 2021. The current national average stands at $3.22 per gallon, marking a 15% decline since mid-September, according to data from the American Automobile Association.
11 Consecutive Weeks of Decline
Gas prices have seen a consistent decline for 11 consecutive weeks, despite recent fluctuations. This downward trend is attributed to falling global demand, even as OPEC+ (Organization of the Petroleum Exporting Countries and allies) decided to implement oil production cuts in 2024. Patrick De Haan, Head of Petroleum Analysis at GasBuddy, points out that the recent volatility in gas prices was influenced by the OPEC+ meeting.
Factors Driving the Price Drop
Benchmark global oil prices settled at their lowest point since July, primarily due to concerns about China’s economy. Despite OPEC+’s decision to cut oil production, global oil supplies are less strained compared to the months following the start of the war in Ukraine. OPEC+’s additional production cuts were seen as insufficient to counterbalance worries about falling global demand. The cost of crude oil, a significant component in retail gasoline pricing, has also contributed to the drop in gas prices.
Hope for Sub-$3 Gas Prices
While OPEC+’s actions and global economic concerns played a role in recent fluctuations, there’s hope that gas prices could dip further. De Haan expresses optimism, stating that the national average could fall to $2.99 per gallon by the end of the year, especially with global oil prices hovering below $73 per barrel.
Increased Gas Supply
Another contributing factor to falling gas prices is the increase in gas supply. U.S. refiners have ramped up production since last year, contributing to higher inventories. A report from the Energy Information Administration indicates that U.S. motor gasoline inventories are 2% higher than a year ago, standing at 218.18 million barrels as of Nov. 24—the highest for this time of the year since 2020.
Potential Boost to Consumer Confidence
Analysts suggest that the decline in gas prices could have positive implications for consumer confidence, particularly ahead of the holidays. Lower gas prices, nearing the $3 per gallon mark, may alleviate concerns that rising prices at the pump could negatively impact consumer sentiment. John Kilduff, a partner at Again Capital, notes that the drop towards $3 per gallon should help maintain consumer confidence.
In summary, the outlook for U.S. gas prices is favorable for consumers, with expectations of prices falling below $3 per gallon before Christmas. This potential relief comes after weeks of consistent decline driven by factors such as falling global demand, OPEC+ decisions, and increased gas supply.
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