U.S. Gasoline Prices Expected to Fall Below $3

By Shariq Khan

NEW YORK (Reuters) – U.S. motorists may see gasoline prices drop below $3 a gallon for the first time in over three years as early as next month, just before the November presidential election, analysts state.

This reduction in gasoline prices, primarily due to weaker fuel demand and plummeting oil prices, offers relief for consumers who have endured record-high fuel costs contributing to inflation. Lower prices could also aid Vice President Kamala Harris and other Democrats in countering criticism from Republicans regarding rising costs at the pump.

As reported on Wednesday, the national average price for regular gasoline was $3.25 a gallon, a decrease of 19 cents from the prior month and 58 cents from a year ago, according to the American Automobile Association (AAA).

Prices are expected to dip below $3 a gallon by late October, accelerated by the end of the summer driving season and retailers starting to sell cheaper winter-grade fuel. In swing state North Carolina, gasoline prices had already fallen below $3 as of Wednesday.

“Americans will definitely remember the price they see when they drive into polling stations, so this is definitely good news for Harris in her campaign for president against Republican Donald Trump,” said Patrick De Haan, an analyst at GasBuddy.com.

Studies by the Wells Fargo Investment Institute reveal an inverse relationship between presidential approval ratings and gasoline prices. Therefore, falling prices could strengthen Democratic candidates in the upcoming election cycle, according to John LaForge, head of real asset strategy at an investment advisory firm.

Although presidents generally have minimal influence over gasoline prices, which are dictated by global supply and demand, rapid declines in prices this year can be attributed to weaker-than-expected demand, especially in the U.S. and China. The global benchmark Brent crude price fell from over $90 a barrel in April to a near three-year low of below $70 on Tuesday.

A potential factor is Hurricane Francine, which was impacting the U.S. offshore oil industry, causing a rise in U.S. crude oil prices by over $2 a barrel due to concerns over production disruptions.

In 2022, surging oil prices over $5 a gallon resulted mainly from supply disruptions following Russia’s invasion of Ukraine amid rising global fuel demand due to easing COVID-19 restrictions.

More consistent supply this year has contributed to declining pump prices as refiners operated at high capacities, noted Brian Kessens, a senior portfolio manager at Tortoise.

The U.S. Energy Information Administration (EIA) anticipated a gasoline demand average of 8.92 million barrels per day this year, approximately 20,000 bpd less than in the previous year. This represents 9% of global oil demand, solidifying the U.S. as the leading fuel consumer globally, thereby enhancing the significance of the dollar-per-gallon rate in governmental performance evaluations.

Impact on Democrats

Republicans have pinned the rise in gasoline prices and inflation on President Joe Biden’s policies; however, De Haan indicated that these arguments are losing traction due to the swift decline in pump prices.

Consumer prices increased by 2.5% in the 12 months up to August, the slowest year-on-year rise since February 2021. Data depicts a 10% decrease in gasoline prices from a year ago, marking the most significant annual decline since July 2023.

As measured by the Consumer Price Index, gasoline prices have remained unchanged since April.

The influence of lower gasoline prices is likely to be most significant in swing states that will play a crucial role in the election, remarked Tom Kloza, head of energy analysis at Oil Price International Service.

In North Carolina, the average price dropped to $2.983 per gallon, while Wisconsin recorded $3.043, per AAA data.

Diesel prices, though less conspicuous, are also trending downward due to weak demand and increased supply, as stated by AAA spokesperson Andrew Gross.

Diesel, a critical fuel for manufacturing and goods transportation, sees rising costs potentially leading to increased prices for various consumer products ranging from eggs to televisions.

The EIA updated its forecast for U.S. distillate fuel demand, which covers diesel and heating oil, to 3.83 million barrels per day—about 1% below its previous prediction and a 2.3% decline from last year.

As of September 9, average diesel prices fell to $3.56 a gallon, down 32 cents from the year’s start and marking the lowest level since October 2021, according to EIA data.

“Regardless of who the next President is, they will certainly benefit from lower fuel prices and significant deflation,” Kloza stated.