US gasoline prices plummet as holiday travelers hit the road
U.S. gasoline prices are falling just in time for Thanksgiving, and with the OPEC Plus oil cartel apparently in disarray, they could fall even further over Christmas.
Lower prices at the pump have helped reduce inflation for most of this year. But this week, according to the AAA motorcycle club, they fell to levels not seen at this time of year since 2021, before Russia’s invasion of Ukraine sent energy prices soaring.
“It’s a great tailwind for consumers,” said Tom Kloza, global head of energy analysis at Oil Price Information Service. “They won’t have to spend much on travel in the coming months, and that should remain the case until mid-winter.”
The national average price for a gallon of regular gasoline on Wednesday was $3.28, about 6 cents less than a week earlier and 27 cents less than a month ago. The price for a gallon of gasoline was $3.64 at the same time last year. Prices have fallen below $3 per gallon in more than a dozen states, falling particularly in Montana, Florida and Colorado.
The main reason for lower gasoline prices is the recent weakness in oil prices, which have fallen by more than $15 per barrel, or almost 20 percent, since early September. Fuel demand was weak in China and parts of Europe, while production was strong in Brazil, Canada and the United States. Gasoline production at U.S. refineries is exceeding demand in some parts of the country.
Diesel prices have also fallen, by about 23 cents per gallon in the past month and by more than $1 per gallon in the past year. That should help lower food prices, as diesel is the main fuel for agriculture and heavy transport.
The decline in oil prices accelerated on Wednesday after reports emerged that the planned meeting of OPEC Plus, a group of 23 oil-producing countries led by Saudi Arabia, had been postponed from this weekend to next Thursday. Saudi Arabia was expected to continue production cuts, while pushing other countries to also be reluctant to raise prices. But Nigeria and Angola are resisting and lobbying for higher production quotas.
“Reaching a new agreement to cut production will prove to be a challenge,” said Jorge León, senior vice president at consultancy Rystad Energy.
He said that although Russia and eight other cartel members agreed to cuts in June, “it would be difficult for these countries to accept even lower production quotas.”
Energy experts say a deal could still be reached, especially if the United Arab Emirates, Kuwait and Iraq agree to voluntary cuts. Saudi Arabia may also be willing to go it alone with austerity, as its government budget and ambitious economic plans depend on high prices.
The uncertainty has served as a signal for traders to bail out crude.
“Smart drivers will save money on the way to a turkey dinner this year,” said Andrew Gross, a spokesman for AAA.
AAA has predicted that more than 49 million Americans will drive to vacation destinations in the coming days, a 1.7 percent increase from last year. Another 4.7 million will fly, a 6.6 percent increase from last year and the highest number since 2005, the motorcycle club said.
Flight tickets will be slightly more expensive than last year, according to the motorcycle club, but otherwise holiday trips should be cheaper. According to the report, the average price for a hotel stay domestically is 12 percent lower than last year, while the cost of a rental car is 20 percent lower.