Gas prices have dropped by almost $2 a gallon since they hit an all-time high in June, and forecasts show the national average could fall below $3 by Christmas.
The average gallon of gas in the U.S. now costs $3.06, while average prices are below $3 in 29 states, according to the price comparison app GasBuddy. At the high point last June, gas cost an average of about $5.02 nationally.
In a report Tuesday, GasBuddy forecasted that the national average would be $2.98 on Christmas, dropping below $3 on Dec. 24.
However, Patrick De Haan, GasBuddy’s head of petroleum analysis, said in a tweet Wednesday that due to rebounding oil prices, their forecast may not materialize. He says it’s now “going to be very close” if prices drop below $3. And even if the national average does drop below $3, it might be long before prices pop back up.
“We’ve seen gas prices cut nearly in half in some areas compared to earlier this year,” De Haan says. “While we’re closing out the year on a positive note, challenges remain that could drive prices up again next spring, so motorists might want to keep their expectations in check and enjoy the sub-$3 gasoline while they can.”
Oil rally could slow gas price declines
Crude oil prices are responsible for 55% of what a gallon of gas costs drivers at the pump. On Thursday, oil prices were trading at around $78 a barrel, up more than 4% from the start of the week, according to the West Texas Intermediate measure.
Oil prices moved higher this week amid a report of declining U.S. crude oil inventories and against the backdrop of positive reports about China’s reopening, which would increase global oil demand.
Also, a major winter storm hitting the middle of the country will likely cause demand for heating oil to rise and could impact oil supply, experts say.
“Oil could be on the verge of a major breakout as the realities of winter are upon us and we get more signs that China is reopening their economy from the COVID lockdown," Phil Flynn of the Price Futures Group said in a research note.
Gas prices vary significantly around the U.S. right now. According to GasBuddy, the average gallon costs $2.44 on average at the cheapest 10% of stations and $4.22 at the most expensive 10%.
In Hawaii, the average gallon costs $5.03. California, where the average price is $4.26, is the only other state with an average above $4. Average gas prices are cheapest in Texas ($2.57), Oklahoma ($2.60) and Arkansas ($2.65).