Could Gas Prices Actually Fall Below $3 Before the End of the Year?
Good news, drivers: Gas prices have a shot at dipping below $3 for the first time in years.
The national average for a gallon of gas is currently $3.30, having decreased 17 cents in the past month, according to AAA. And before the end of 2024, prices could drop even further, according to analysts including Andy Lipow, president of Lipow Oil Associates.
“I’m expecting that gasoline prices are going to fall another 15 to 20 cents per gallon over the next three weeks,” he says. “There’s a good possibility that the average national retail price of gas will hit $3 per gallon by the end of the year.”
The last time the national average was below $3 was in May 2021, according to AAA.
Now, oil prices are down to around their lowest level in a year, paving the way for cheaper gasoline.
Crude oil makes up about half of what we pay for a gallon of gas, and oil has been trading at lower levels — under $70 per barrel, per the West Texas Intermediate measure. Key factors include weakness in Chinese manufacturing, which could signal less demand for oil, and restoration of oil exports in Libya, Lipow says. (Political disagreements between rival parties in Libya led to a halt of production and exports temporarily affecting global oil supply, but the issues are reportedly being resolved.)
Will gas prices fall below $3?
While cautioning that gas price forecasts are subject to many variables, Denton Cinquegrana, chief oil analyst at the Oil Price Information Service, says the drop in the price of oil is a welcome development for drivers.
“You already have 10 states with an average below $3 per gallon,” he says, adding that five more states could easily be below $3 a gallon by the end of the month.
States are transitioning from summer-grade to winter-grade gasoline, a different blend that is easier (and cheaper) to make. Gas prices usually fall around this time of year when the switch happens.
Additionally, low demand from drivers has contributed to recent price declines, according to AAA. The auto club reports that gas prices are 51 cents cheaper than a year ago, and AAA spokesperson Andrew Gross wrote in a blog post Thursday that “this trend of falling pump prices will likely continue.”
Despite the positive signals, cheaper gas prices are far from guaranteed.
In June, OPEC+ (the Organization of Petroleum Exporting Countries plus its allies) indicated intentions to restore oil output after previously cutting production. However, with oil prices at their current levels, OPEC+ could potentially delay that move, keeping supply lower and putting upward pressure on gas prices.
The other major risk would be a hurricane impacting refining capacity. The peak of hurricane season in the Atlantic Ocean is officially Tuesday.
“So far, the hurricane season has been a bit of a dud, and knock on wood that continues,” Cinquegrana says. “[But] that’s something that could certainly deter the forecast for prices to drop below $3 a gallon.”
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In recent news, there is a possibility that gas prices may dip below $3 for the first time in years. The current national average for a gallon of gas is $3.30, which has decreased by 17 cents in the past month, according to AAA. Analysts, including Andy Lipow, president of Lipow Oil Associates, predict that prices could drop even further by the end of 2024.
Lipow states, “I’m expecting that gasoline prices are going to fall another 15 to 20 cents per gallon over the next three weeks. There’s a good possibility that the average national retail price of gas will hit $3 per gallon by the end of the year.” The last time the national average was below $3 was in May 2021.
One of the main factors contributing to this potential decrease in gas prices is the drop in oil prices. Oil makes up about half of the cost of a gallon of gas, and it has been trading at lower levels, currently under $70 per barrel according to the West Texas Intermediate measure. This is due to various factors, such as weakness in Chinese manufacturing and the restoration of oil exports in Libya.
However, it is important to note that gas price forecasts are subject to many variables. Denton Cinquegrana, chief oil analyst at the Oil Price Information Service, cautions that while the drop in oil prices is a positive sign for drivers, it is not a guarantee that gas prices will fall below $3. Currently, 10 states have an average gas price below $3, and five more states could potentially join them by the end of the month.
The transition from summer-grade to winter-grade gasoline, which is a cheaper blend to produce, is also contributing to the potential decrease in gas prices. Additionally, low demand from drivers has also played a role in recent price declines.
However, there are still risks that could impact gas prices. OPEC+ has indicated intentions to restore oil output, which could potentially keep supply lower and put upward pressure on gas prices. Additionally, the peak of hurricane season in the Atlantic Ocean is approaching, and a hurricane could potentially impact refining capacity.
Despite these risks, AAA spokesperson Andrew Gross believes that the trend of falling gas prices will likely continue. He notes that gas prices are currently 51 cents cheaper than they were a year ago. As always, it is important for drivers to stay informed and monitor gas prices in their area.
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