Christmas wishes are coming true — gas prices might be getting less scary for your bank account.
The average cost per gallon of regular unleaded gasoline dropped to an average of $3.40 nationwide, per AAA data, which is just 4 cents more than the $3.36 per gallon average a year ago. Prices have declined for four consecutive weeks and experts expect the prices to continue to drop.
“Every state has again seen average gasoline prices drop in the last week, and it remains very possible the national average could fall under $3 per gallon by Christmas,” Patrick De Haan, head of petroleum analysis at gas price tracking company GasBuddy, said on Monday. “We’ll likely see another week of declines at the pump.”
This year, gas prices reached all-time highs. According to AAA data, the average cost per gallon of unleaded gasoline was $5.01 in mid-June.
The drop in high gas prices follows a decrease in crude oil prices. According to Forbes, crude oil prices fell to $82 per barrel last week — a 41% decline from the cost of $139 per barrel in March, when oil prices spiked following Russia’s invasion of Ukraine.
The average gallon of gas was $3.54 when Russia invaded Ukraine in February, reports the Wall Street Journal. The U.S. and Europe pulled away from buying Russian oil, so Russia sold more oil to Asia and Africa.
Now, as China continues to enforce “zero-COVID” policies, the country’s demand for oil has decreased. China’s reduced oil consumption has been a major factor in declining oil prices, the Wall Street Journal reports. With China’s recent surge in COVID-19 cases, it is likely the cost of oil will continue to decline.
“With China now battling its most widespread Covid-19 outbreak since the start of the pandemic, the country and its economy face a dire few weeks,” said Edward Gardner, an economist at Capital Economics, per the Wall Street Journal. “As a result, China’s demand for oil will come under pressure.”
Oil demand and production in the U.S.
As high inflation rates continue to afflict American budgets, the demand for gasoline has dropped. The current financial market has Americans watching their wallets and cutting back on spending.
“We’re heading into serious recession in Europe and further economic slowdown in the U.S. as people struggle with high interest rates and worry about their personal wealth and savings,” said Ben Cahill, an energy security analyst at the Center for Strategic and International Studies, per The Washington Post. “Add it all up and it creates a bleak picture for oil demand. Prices are reflecting that.”
Oil refineries are also producing more than they have in recent months. During September and October, U.S. oil refineries underwent seasonal maintenance, which contributed to the low production rates, reports the U.S. Energy Information Administration.
OPEC’s decision to keep oil production quotas
OPEC, an alliance of oil producers, met on Sunday. The group reached a decision to stick with lowered oil production quotas, per CNBC.
In October, President Joe Biden criticized Saudi Arabia for its decision to cut back oil production by two million barrels a day — a decision the Biden administration saw as an attempt to increase oil price, per The New York Times.
On Friday, the president of the European Commission announced on Twitter that the E.U. reached a deal with Russia to cap oil prices at $60 a barrel.
“It’s in the range of prices that we’ve been talking about for a while in terms of creating and helping us do two things. One is reducing Russia’s revenues. But the second one is making sure that we keep Russian barrels on the market,” U.S. Deputy Treasury Secretary Wally Adeyemo said, per Reuters.
Adeyemo said that he believes the price cap will “accomplish those two goals and put us in a position where Russia’s revenues come down while ensuring that people get access to reliable, cheap energy around the world,” per Reuters.
Regional differences in gas prices
Regional difference in gas prices are apparent across the U.S. Gas price averages are most expensive in California at $4.77, but California’s average cost is still following the trend down from June, when a gallon of gas was $6.44, per AAA data.
Gas prices are lowest in Texas, at $2.78 per gallon, per AAA data.
In Utah, an average gallon of gas will cost you $3.79. During mid-June, that same gallon was $5.26, per AAA data. For the cheapest gallon of gas in the state, fill up in Sevier for $3.41.