For the 61st day in a row, gas prices have taken a plunge, delivering an unexpected gift to American consumers just in time for the holiday season. After hovering near the $4 per gallon mark back in September, the average cost for a gallon of regular gasoline now stands at $3.25, marking a five-cent drop from the previous week and a 26-cent decline from a month ago, based on AAA data.
This continuous decline in gas prices has been a win for consumers, providing relief and freeing up extra cash as they gear up for the critical holiday shopping spree. Gas prices, being prominently visible and an unavoidable expense for most, have a direct impact on consumer spending habits.
Tom Kloza, the global head of energy analysis at the Oil Price Information Service, emphasizes the significant influence of gas prices on consumer behavior, calling it a “clear tailwind for consumer spending.” Thanksgiving travelers were greeted with the most affordable gas prices for the holiday since 2020, making travel more economical for many, especially after the limitations imposed by Covid-19 during the previous year.
While it’s typical for gas prices to decrease after the conclusion of the summer driving season due to reduced demand, the magnitude of the current drop remains noteworthy. Despite geopolitical tensions and global conflicts threatening oil supply from regions like the Middle East and Russia’s interventions in Ukraine, oil prices have plummeted by about 20% since late September, impacting retail pump prices.
The recent postponement of an OPEC+ meeting, initially scheduled for November 30, has contributed to the fluctuation in oil prices. This delay hints at internal disagreements within the producer group regarding future strategies, mirroring the pivotal November 2014 meeting when significant price drops occurred due to Saudi Arabia’s decision to increase oil output drastically.
Despite variances in gas prices across different states, the trend of declining prices prevails, with 15 states now averaging $3 or less for a gallon of gas. However, states like Hawaii, Washington, and California, which have historically higher prices, skew the average, although even California has witnessed a notable drop in prices over the past month.
The median price, a more accurate representation of most consumers’ costs, currently stands at $3.06 per gallon, down from $3.40 a year ago. Gas stations offering gas at $2.75 or less per gallon have multiplied, exceeding the count of 20,000 stations, according to GasBuddy.
Analysts like Kloza anticipate this downward trend in gas prices to persist in the foreseeable future, expecting it to endure until the end of the year, contributing to a phase of notable disinflation.
