Gasoline Prices Expected to Fall Below $3 a Gallon

By Shariq Khan

NEW YORK (Reuters) – U.S. motorists are expected to see gasoline prices dip below $3 a gallon for the first time in over three years as soon as next month, just before the presidential election in November, according to analysts.

Softer gasoline prices, driven by lower fuel demand and decreasing oil prices, offer relief to consumers grappling with previously high fuel costs that have fueled inflation. These lower prices could assist Vice President Kamala Harris and other Democrats in countering Republican criticisms regarding rising fuel costs.

As of Wednesday, the national average for regular gasoline was $3.25 per gallon, down 19 cents since last month and 58 cents since last year, based on data from the AAA. Analysts predict that average prices will fall below $3 a gallon by late October, especially with the summer driving season ending and retailers beginning to sell cheaper winter-grade fuel.

In North Carolina, a crucial swing state for the upcoming election, gasoline prices were already below $3, noted analyst Patrick De Haan of GasBuddy.com.

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

Studies from the Wells Fargo Investment Institute and others indicate that U.S. presidential approval ratings tend to decrease when gasoline prices rise. Thus, falling gas prices could provide a boost for Democrats this election cycle, according to John LaForge, head of real asset strategy at the investment advisory firm.

While presidents have limited control over gasoline prices, which depend on global supply and demand, this year's price drop can be attributed to weaker demand, particularly from the U.S. and China. Global benchmark Brent crude prices have fallen from over $90 a barrel in April to a near three-year low of under $70.

However, factors such as Hurricane Francine, which was affecting U.S. offshore oil production on Wednesday, led to a rise of over $2 per barrel in U.S. crude oil prices due to concerns over potential production shutdowns.

Last year, oil prices surged above $5 a gallon amid supply shocks following Russia's invasion of Ukraine while global fuel demand was recovering from COVID-era lockdowns. A more stable supply this year has contributed to reduced pump prices.

The U.S. Energy Information Administration (EIA) forecasts that gasoline demand will average 8.92 million barrels per day in 2023, slightly lower than last year, keeping the U.S. as the world's largest fuel consumer.

Despite Republican claims that President Joe Biden's policies have driven up gasoline prices and inflation, the rapid decrease in prices is diminishing the effectiveness of these criticisms, according to De Haan.

Consumer prices increased by only 2.5% over the year leading up to August, the slowest increase since February 2021. Gasoline prices dropped 10% year-on-year, marking the largest annual decline since July 2023. Since April, gasoline prices, as measured by the Consumer Price Index, have remained unchanged.

The impact of falling gasoline prices is expected to be most significant in swing states affecting the election outcome. In North Carolina, the average price was $2.983 per gallon on Wednesday, with Wisconsin at $3.043.

Diesel prices, another key economic indicator, are also reducing due to weak demand and improved supply, as noted by AAA spokesperson Andrew Gross. Rising diesel costs affect consumer prices for goods ranging from food to electronics. The EIA has revised its forecast for U.S. distillate fuel demand down to 3.83 million barrels a day, a 1% decrease from previous predictions and a 2.3% decline from the previous year.

National average diesel prices have dropped to $3.56 per gallon, down 32 cents since the beginning of the year and the lowest since October 2021, according to EIA data.

“Whoever the next President is will benefit from lower fuel prices and potentially serious deflation,” Kloza remarked.