Relief is finally on the way for drivers who are sick of rising gas prices. This year's surge in prices at the pump appears to have finally come to an end, and a new government report predicts that gas prices will dip well below $3 in the new year.
The U.S. Energy Information Administration published its short-term energy outlook Tuesday, forecasting that prices will first fall to $3.01 nationally next month before averaging out to $2.88 per gallon throughout the rest of 2022.
According to the automotive group AAA, gas prices are already on their way down. The nationwide average price for a gallon of regular gasoline today is now $3.34, down 8 cents from a month ago.
“Consumers may be catching a break at the pump right now, but it’s not for a very good reason,” AAA spokesperson Andrew Gross said in a statement Monday, citing coronavirus-related economic complications in the oil industry.
Still, AAA data show gas prices today are $1.18 higher than they were at this time last year, when demand was down due to travel restrictions aimed at curbing the then-rapidly-spreading coronavirus.
What’s causing the drop in gas prices?
The EIA attributes the coming free fall in gas prices to major shifts in the crude-oil market. The price of oil dropped more than $11 in early December from its average of $81 per barrel in November, the agency noted. The EIA expects crude oil prices to average $70 per barrel throughout 2022.
As Money reported last week amid tumbling oil prices, when crude oil gets cheaper, gas prices follow. That’s because as much as 56% of the price consumers pay at the pump goes toward the wholesale cost of crude oil, according to the EIA.
“This is a very complicated environment for the entire energy sector,” said Steve Nalley, acting EIA administrator, in an announcement of the energy outlook report.
But for consumers who’ve been grappling with record-setting inflation, it’s a welcomed moment of reprieve.