In a welcome turn of events for American consumers, gasoline prices have experienced a significant drop, marking the longest period of consecutive decline since September, just in time for the holiday season.
A Welcome Trend for Consumers
As reported by AAA, the average price for a gallon of regular gas stood at $3.25 on Tuesday, showing a notable decrease from both a week and a month ago.
This decline in gas prices, which has been ongoing since September 18, comes as a relief for consumers, particularly during the crucial holiday shopping season. Tom Kloza, global head of energy analysis at the Oil Price Information Service, commented on the impact of this trend, stating, “Gasoline prices are so in-your-face.
This is a clear tailwind for consumer spending”. The drop in prices is especially significant considering the context of Thanksgiving Day, where millions of Americans, who were unable to travel in 2020 due to COVID-19, were greeted by the cheapest gas prices for the holiday since that year.
Factors Influencing the Price Drop
Typically, gas prices tend to decrease after the summer driving season as demand falls. However, the current decline is notable not just for its duration but also for its magnitude, especially in the context of several global events that could have driven prices in the opposite direction.
Despite potential disruptions from the Israel-Hamas war and ongoing tensions involving Russia, Ukraine, and oil supply cuts by Saudi Arabia, oil prices have fallen significantly. U.S. crude saw a drop of nearly 1% to close at $74.86 a barrel on Monday, before rebounding slightly on Tuesday.
This decrease in oil prices has been attributed to a combination of oversupply and weak demand, particularly from China. The oil market's focus has shifted from fears of supply disruptions in the Middle East to concerns about oversupply.
This shift was further highlighted by OPEC and its allies, known as OPEC+, postponing their meeting without explanation, fueling speculation about internal disagreements within the group. Kloza predicts that OPEC+ will likely maintain existing quotas through the first quarter of 2024.
However, there is speculation that Saudi Arabia might advocate for deeper production cuts to counterbalance rising non-OPEC supply, including record-setting production in the United States.