The last period when petrol was this inexpensive, an inflation rate of 4% felt significant, JD Vance was still a private citizen, and the United States had just embarked on its complicated exit from Afghanistan.
On Tuesday, for the initial time in four and a half years, the average price of gasoline in the United States fell beneath $3 per gallon, as reported by AAA.
This benchmark signals a welcome piece of positive news amidst an affordability problem that has spanned several years, characterized by elevated costs for essential goods.
The mean price for regular unleaded gasoline decreased to $2.998 per gallon, down from $3.001 on Monday. Pump rates have fallen by approximately six cents just over the last week and are below the $3 mark for the first time since May of 2021.
Fuel is also slightly more affordable compared to this time last year; the national average stood at $3.05 per gallon twelve months prior. Last month saw a brief period where annual gas price comparisons were actually higher.
In numerous regions across the country, prices are even lower still.
AAA indicates that the average gas price is under $2.75 a gallon in 18 states, including New Mexico, South Carolina, Wisconsin, Iowa, and Colorado.
This contrasts sharply with 2022, when the conflict in Ukraine caused energy costs to soar. At one juncture, gas prices climbed past $5 per gallon for the first time ever, pushing the Biden administration to release supplies from the strategic petroleum reserve.
President Donald Trump has designated decreased energy costs as a central objective for a potential second term, promising to constrain pump prices by championing a deregulatory, fossil fuel-friendly “drill, baby, drill” approach.
Early in his second tenure, Trump utilized a prominent address in Davos to urge the Saudi Arabia-led OPEC cartel to boost output.
While Trump’s pledges to lower grocery costs have not materialized and electricity expenses have significantly increased, petrol is marginally cheaper than it was at this juncture last year. The primary factor: Oil itself is considerably less expensive than it was at comparable points in previous years.
In early December 2022, months subsequent to the Russian invasion of Ukraine, US oil traded around $81 per barrel. This time last year, crude was valued near $70 a barrel. Presently, a barrel of crude is fetching only $59.
The decline in oil prices stems from supply levels consistently exceeding demand.
US oil production continues to set new records, even though the increase over last year is modest.
A more substantial contributor is OPEC’s decision to increase production this year, a move the alliance had resisted in prior years.
As always, oil prices are susceptible to rapid reversals, particularly if investors grow concerned about geopolitical instability threatening supply lines. Trump has recently voiced threats against Venezuela, which possesses the world’s largest oil reserves.
However, some analysts on Wall Street anticipate that oil prices might remain suppressed for an extended period, sustaining lower gasoline costs.
JPMorgan Chase analysts projected in a recent report that if OPEC refrains from stepping in to absorb the excess supply, Brent crude oil—the global benchmark—is likely to fall into the low $50s per barrel by the final quarter of next year and conclude 2026 in the $40 range.
JPMorgan further noted that the “outlook deteriorates” in 2027, with a growing surplus pushing Brent to an average of only $42 per barrel and potentially sinking into the $30s by the close of that year.
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