Key Facts
- Gas prices in the U.S. have fallen for 12 straight weeks and are at their lowest levels in 11 months.
- An overproduction earlier in the year led to a surplus, which is helping to push the prices lower.
- The price of oil has been falling, which has a significant impact on gas prices.
It could be a good old-fashioned holiday season this year, and by “old,” we mean 2021.
Gas prices have been steadily falling across the United States. In Southern California, the average price at the pump has fallen on 67 of the last 69 days, and nationally, the average gas price has been going down for 12 weeks in a row.
Many analysts expect that trend to continue in the short term, and some are predicting that the average gas price in the U.S. could fall below $3.00 a gallon by Christmas, which would be the first time since the 2021 holiday season that has happened.
A week into December, the average gas price stands at just over $3.22, which is down 15% since September, but still a long way from the $3.00 mark.
Are the experts right? Will gas prices start at $2 by the end of the year? And what are the reasons for this Christmas miracle for American consumers?
New Sources of Fossil Fuels
When the war in Ukraine started in February of last year, the global fuel supply was threatened. That forced many countries, including the United States, to try to find alternative means of meeting their demand for oil and gas. In America, politicians like to refer to that as “reducing dependence on foreign oil.”
To a large extent, the United States has done that. American oil companies are producing oil at a record pace. In September, one out of every eight barrels of oil produced in the world came from the U.S. That has led to a glut of oil on the market, and, as every Econ 101 student knows, when supply goes up, prices go down.
Oil prices are related to gas prices, with the cost of a gallon of crude impacting gas prices by between 55 and 60%. So that is putting downward pressure on the price of gas as well.
Gas suppliers have also stepped up production. U.S. gas inventory is at more than 218 million barrels, which is 2% higher than last year and the largest supply of gasoline in the country since 2020.
Slowdown in The Far East
Supply is one component of the price of an item. Demand is the other. Despite the push for electric vehicles, U.S. demand for gasoline is as high as ever. China, however, has shown signs that its large economy may be cooling, and that includes the country’s demand for gas and oil. China’s imports of oil in November were lower than last year, a surprising development that pushed oil prices below the $70 mark.
What Will Happen to Gas Prices?
Globally, oil companies aren’t going to stand by and watch the price of their resource fall without trying to do something to stop the bleeding.
The members of OPEC announced that they would be cutting their supply of oil in an effort to reduce the glut of oil and hopefully allow the price to rebound.
Despite those efforts, more than half of all gas stations across the U.S. are currently selling gas below the magic $3 a gallon mark. Experts estimate that gas prices will continue to fall the rest of the year, by an average of about half a cent a day. If that’s true, it could have the average price flirting with the $3 mark.
Heading into an election year, the idea of giving holiday shoppers a little extra money in their pocket instead of giving it to the gas station is appealing to both parties, so it’s a good bet that the decrease will continue in the short term.
The Pick
Currently, BetOnline (find out more with our BetOnline Review) is doubting that we’ll get below $3 by the end of the year.
The favorite among the online betting site‘s betting odds on the average U.S. gas price on December 31 is $3.00 to $3.24, which has odds of +105. In fact, $3.25 to $3.49 is the next best bet, according to BetOnline, ,at +230. That sets bettors up for the chance to cash in on an unlikely underdog by going with the experts and taking gas at $2.75 to 2.99 at +250 odds.
Gas price on 12/31 to be between $2.75 and 2.99 a gallon, +250 at BetOnline.
