U.S. gasoline prices are plunging just in time for Thanksgiving, and with the OPEC Plus oil cartel in apparent disarray, they could be heading lower for Christmas.
Lower prices at the pump have helped ease the inflation rate most of this year. But this week, they fell to levels not seen at this time of year since 2021, according to the AAA motor club, before the Russian invasion of Ukraine sent energy prices higher.
“For consumers it’s a terrific tailwind,” said Tom Kloza, global head of energy analysis at Oil Price Information Service. “They are not going to have to spend an awful lot on travel in the next few months, and that should persist into the middle of the 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 gas was $3.64 at the same time last year. Prices have dropped below $3 a gallon in more than a dozen states and are falling with particular speed in Montana, Florida and Colorado.
The primary reason for lower gasoline prices is the recent weakness of oil prices, which have fallen by more than $15 a barrel, or nearly 20 percent, since early September. Demand for fuel has been weak in China and parts of Europe, while production has been strong in Brazil, Canada and the United States. Gasoline production at American refineries is running above demand in some parts of the country.
Diesel prices have also eased, by about 23 cents a gallon over the last month and more than $1 a gallon in the last year. That should help reduce food prices because diesel is the primary fuel for agriculture and heavy transport.
The drop in oil prices accelerated on Wednesday as reports emerged that the planned meeting of OPEC Plus, a group of 23 oil-producing countries led by Saudi Arabia, had been postponed from the weekend until next Thursday. Saudi Arabia had been expected to extend its cuts in production, while cajoling other countries to show restraint as well to bolster prices. But Nigeria and Angola are resisting, and lobbying for higher production quotas.
“Reaching a new agreement to cut production will prove to be challenging,” said Jorge León, a senior vice president at Rystad Energy, a consulting firm.
He said that although Russia and eight other members of the cartel agreed to cuts in June, “it would be difficult for these countries to accept even lower production quotas.”
Energy experts say there could still be an agreement, especially if the United Arab Emirates, Kuwait and Iraq agree to voluntary cuts. Saudi Arabia might also be willing to go it alone with cuts because its government budget and ambitious economic plans depend on high prices.
The uncertainty has served as a signal to traders to bail out of crude.
“Savvy drivers will find savings on their 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 holiday destinations in the coming days, an increase of 1.7 percent from last year. Another 4.7 million will fly, a 6.6 percent increase from the last year and the highest number since 2005, according to the motor club.
Airfares will be slightly more expensive than last year, the motor club said, but otherwise holiday travel should be cheaper. It said the average price for a domestic hotel stay is down 12 percent from last year, while rental car costs are 20 percent lower.