Gas Prices Hit Year-Long Low Just In Time For Christmas

Get ready to hit the road this holiday season because gas prices in the U.S. are hitting record lows. Analysts predict that by Christmas, the national average gas price could drop below $3 per gallon for the first time in years.

According to data from the American Automobile Association, the current national average price is $3.22 per gallon, a significant drop of 15 percent since mid-September. This price decline has been consistent for the past 11 weeks, driven by falling global demand, despite OPEC+ (Organization of the Petroleum Exporting Countries and its allies) deciding to cut oil production.
Patrick De Haan, head of petroleum analysis at GasBuddy, explains, “We’ve seen the national average decline for 11 consecutive weeks, even as some states experienced price jumps, while others saw prices continue to decrease. The recent volatility in gas prices can be attributed to the OPEC+ meeting, causing oil prices to surge initially and then plummet.”

Benchmark global oil prices have also softened, settling at their lowest level since July due to concerns about China’s economy. Although OPEC+ has planned supply cuts, oil supplies globally are less strained than they were following the start of the war in Ukraine.

De Haan notes, “Even with the OPEC+ decision to intensify production cuts, worries about declining global demand have driven oil prices below $73, raising optimism that the average national gas price might still drop to $2.99 per gallon by the year’s end.” The primary determinant of retail gasoline prices is the cost of crude oil. Presently, U.S. West Texas Intermediate crude futures stand at $72.32 per barrel, marking a roughly 10 percent decrease from earlier this year.

The surge in gas supply is also attributed to increased production and inventory restoration by U.S. refiners over the past year. The Energy Information Administration recently released a report stating that total U.S. inventories of motor gasoline are at their highest point for this time of year since 2020, with a current level of 218.18 million barrels, a 2 percent increase from the previous year.

The drop in gas prices is expected to boost consumer confidence ahead of the holiday season. John Kilduff, a partner at New York-based Again Capital, believes that the decrease toward $3 per gallon will help maintain consumer optimism, as rising prices approaching $4 per gallon can negatively impact the consumer psyche.

So, as you plan your holiday travel, remember that gas prices are on your side this year. With prices expected to continue falling, it’s the perfect time to hit the road and enjoy the festivities without breaking the bank.