There is good news for drivers ahead of the holidays as U.S. gas prices are the lowest they have been all year.
In fact, analysts predict that by Christmas, the national average gas price could fall below $3 per gallon for the first time since 2021.
The national average price stands at $3.22 per gallon as of Wednesday, down 15% since mid-September, according to data from the American Automobile Association. Prices have declined for 11 consecutive weeks, driven down by falling global demand, even as OPEC+, the Organization of the Petroleum Exporting Countries and its allies, decided to cut oil production in 2024, analysts at GasBuddy said.
"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," said Patrick De Haan, head of petroleum analysis at GasBuddy.
Prices have softened with benchmark global oil prices, which settled on Tuesday at their lowest since July as traders worried about China's economy. Despite OPEC+'s planned supply cuts, global oil supplies are less strained than they were in the months following the start of the war in Ukraine.
"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," De Haan said.
"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," he added.
The cost of crude is the biggest component in retail gasoline pricing. U.S. West Texas Intermediate crude futures settled at $72.32 a barrel on Tuesday, down about 10% this year.
Gas supply is up as well, as U.S. refiners have increased output since last year and rebuilt inventories in recent months.
A new report from the Energy Information Administration said total U.S. motor gasoline inventories stood at 218.18 million barrels as of Nov. 24, 2% higher than a year ago and the highest for this time of the year since 2020.
Analysts say that falling gas prices could boost consumer confidence ahead of the holidays.
"It is argued that gasoline rising towards $4 a gallon gasoline hurts consumer psyche, so a drop towards $3 should help keep it strong" John Kilduff, partner at New York-based Again Capital, told Reuters.
Reuters contributed to this report.