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Commodities Corner: Gas prices may fall below $3 a gallon, a ‘nice surprise’ for holiday travelers

U.S. gasoline prices at the pump have declined as oil prices continue their retreat from yearly highs, and prices for the fuel may even drop below $3 a gallon on average before the year is done.

“Falling gasoline prices will give people confidence that their fuel bill will be a nice surprise” as drivers take to the road for the holiday travel period, said Denton Cinquegrana, chief oil analyst at the Oil Price Information Service (OPIS), a Dow Jones company.  

That’s especially true “if you are driving in one of the 23 states that have an average below $3 per gallon,” he said. Although “that shouldn’t be too hard to find” as about 57% of the stations in the U.S. sell gas for below $3 a gallon.  

As of Monday, the average national price for regular unleaded gasoline stood at $3.153 a gallon, down from $3.242 a week ago, and down from $3.376 a month ago, according to AAA.

A chart of average U.S. prices for regular unleaded gasoline from 2019 to 2023, as Dec. 7, 2023, according to AAA.


Crude-oil prices tend to drop nearly 30% from late September into early winter with gasoline prices “trailing the play,” said Andrew Gross, AAA spokesman, in press release last week. He said more than half of all U.S. fuel locations sell gasoline at less than $3 a gallon and the national average may “dip that low as well,” before the end of the year.

The fall in fuel prices follows a slight rise in weekly domestic demand for gasoline along with a hefty rise in supplies of the fuel.

Data from Energy Information Administration show gasoline product supplied, a proxy for demand, edged up to 8.466 million barrels a day for the week ended Dec. 1, from 8.206 million barrels a day a week earlier, while weekly supplies climbed by 5.4 million barrels a day to 223.6 million barrels.

Gasoline supplies on the Gulf Coast started the month of December with the most gasoline on record, said Cinquegrana. “Refiners in that part of the world will have to do whatever they can to push out gasoline and not create a glut.”

Against that backdrop, futures prices for reformulated gasoline RBF24, +0.22% RB00, +0.22% traded on the New York Mercantile Exchange fell to their lowest in two years on Thursday, when it settled at $2.0012 a gallon, the lowest finish since Dec. 3, 2021, according to Dow Jones Market Data.

Historically, gasoline futures tend to make their low in early December, said Brian Milne, product manager, editor, and analyst at DTN. He expects the fall in reformulated gasoline prices to be passed through to retail prices in two weeks.

Seasonal factors, meanwhile, have been “exacerbated” by lower crude-oil prices, he said. U.S. benchmark West Texas Intermediate crude futures CLF24, +0.46% CL.1, +0.46% settled at $69.34 Thursday on Nymex, the lowest since June 27.

“Crude oil costs have dropped back on growing supply availability, namely from the United States, Brazil, and Guyana, and concern over slowing global economies and, as a result, demand for oil,” said Milne.

Also read: What the Venezuela-Guyana border dispute means for oil prices

Oil prices also failed to get a lasting boost from a decision by the Organization of the Petroleum Exporting Countries and their allies on Nov. 30 to implement additional voluntary oil production cuts in the first quarter of next year.

Read: Can gasoline prices keep falling after OPEC+ oil output cuts? What drivers need to know.

A big boost in the University of Michigan’s U.S. consumer sentiment index in early December was likely spurred by lower gasoline prices, Milne said. Retail gasoline prices have fallen steadily in the fourth quarter and stand near one-year lows nationally.

“We are close to a bottom” for retail gas prices, said Milne.

On Monday, AAA said it expects 115.2 million domestic travelers to head 50 miles or more from home over the 10-day holiday travel period, which runs from Dec. 23 to Jan. 1, 2024. That’s a  2.2% increase over last year and the second highest year-end travel forecast since 2000, when AAA began tracking holiday travel, said AAA.

Most travelers, 90%, or 103.6 million, plan to travel by automobile, the AAA report said.

Looking a bit further ahead, Milne expects to see a 25 cents to 30 cents gain in the national average retail gas price in the first quarter to $3.40 to $3.45 a gallon.

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