Gasoline prices in the US are expected to reach as low as $3.25 per gallon by the end of this year, despite the rising prices of crude oil. According to Patrick De Haan, the head of petroleum analysis at GasBuddy, this prediction is in line with expectations. Currently, the national average price for a gallon of gasoline is $3.558, which is already down 8% from its peak last month. This translates to savings of about $5 per tank. De Haan estimates that gas prices could drop by up to 9% from their current levels.
This downward trend in gas prices comes at a time when oil prices have been increasing. Brent crude, the international benchmark, is now trading around $92 per barrel, up 10% from its low in October. Geopolitical tensions and OPEC production cuts have contributed to the surge in oil prices. However, De Haan explains that the cost of crude oil only accounts for about 55%-60% of the cost of gasoline. Other factors such as demand and refinery issues can also influence gas prices.
The decline in gas prices is considered to be a seasonal norm, as cooler temperatures discourage travel and prompt the use of cheaper winter gasoline blends. Refinery overproduction in response to higher gasoline prices earlier this year has also led to an oversupply. As a result, speculators have decreased their long positions on futures, contributing to the decline in gas prices.
While the current outlook for gas prices is positive, there are factors that could impact future price movements. The ongoing conflict between Israel and Hamas could potentially disrupt the oil market if it escalates. Additionally, the closure of the LyondellBasell Houston refinery in 2025 could significantly reduce oil supply. On the other hand, new refinery projects in Nigeria and Mexico may increase market inventories, potentially suppressing gasoline margins for a period of time.
Overall, US drivers can expect lower gas prices for the rest of the year, providing some relief at the pump. The potential drop to as low as $3.25 per gallon would bring prices close to the year’s previous low of $3.207 per gallon. As the demand for gasoline becomes more elastic and remote work allows for more flexibility in travel, the future price of gas remains uncertain. However, for now, American consumers can enjoy the benefits of falling gas prices.
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