As the holiday season approaches, there is promising news for U.S. drivers: gas prices have reached their lowest point this year, and analysts anticipate further declines.
By Christmas, the national average gas price could dip below $3 per gallon for the first time since 2021, a significant relief for consumers.
National gas price drop despite OPEC+ production cuts
Data from the American Automobile Association (AAA) reveals that the national average gas price is currently $3.22 per gallon, marking a 15% decrease since mid-September.
This consistent drop over the past 11 weeks is primarily attributed to decreased global demand. This trend persists despite OPEC+, the Organization of the Petroleum Exporting Countries, and its allies cutting oil production in 2024.
Analysts at GasBuddy have been closely monitoring these developments.
GasBuddy’s Patrick De Haan on gas price decline amidst OPEC+ volatility
Patrick De Haan, head of petroleum analysis at GasBuddy, explained the current dynamics: “We’ve barely eked out a drop in the national average over the last week, extending the streak to 11 straight weeks of decline, even as some states have seen prices jump, while others have seen prices continue to inch lower.”
“Motorists can blame the OPEC+ meeting for causing oil to jump early last week and then plummet late last week for the volatility in gas prices.”
Benchmark global oil prices, a critical factor in this scenario, have also softened. Prices settled at their lowest since July on Tuesday, with traders expressing concerns over China’s economic outlook.
Global gas prices remain stable despite OPEC+ proposed cuts
Despite OPEC+’s planned supply reductions, global oil supplies are more stable than in the immediate aftermath of the war in Ukraine.
De Haan provided further insights: “The good news is that as the dust settled, OPEC+ agreed to barely move the needle, deepening their production cuts by an additional 900,000 barrels per day in 2024, with Saudi Arabia extending their own million barrel per day cut through March.”
“However, that wasn’t enough to offset concerns of falling global demand, which pushed oil back down to below $73 in Sunday night trading, giving hope that the national average still could fall to $2.99/gal by the end of the year.”
Increase in gasoline supply in the U.S. makes positive impact on gas prices
The cost of crude oil is the most significant factor in determining retail gasoline prices. U.S. West Texas Intermediate crude futures, for instance, settled at $72.32 a barrel on Tuesday, showing a decrease of about 10% this year.
In addition to the drop in global oil prices, increased gasoline supply in the U.S. contributes to the lowering of gas prices. U.S. refineries have ramped up their output compared to last year and have rebuilt their inventories in recent months.
A report from the Energy Information Administration highlighted this increase, stating that total U.S. motor gasoline inventories were at 218.18 million barrels as of Nov. 24, which is 2% higher than a year ago and the highest for this time of year since 2020.
Decrease in fuel cost encourages economic buoyancy
These falling gas prices are expected to positively impact consumer confidence, particularly as the holiday season nears.
John Kilduff, a partner at New York-based Again Capital, told Reuters: “It is argued that gasoline rising towards $4 a gallon gasoline hurts consumer psyche, so a drop towards $3 should help keep it strong.”
The current trajectory of declining gas prices, influenced by global oil supply dynamics and increased U.S. gasoline production, offers a potential boost to the economy and consumers alike.
As families prepare for the holidays, the decrease in fuel costs could not only ease financial burdens but also encourage more travel and spending, adding a welcome buoyancy to the festive season.