U.S. gasoline prices are the lowest they have been since January and by Christmas could fall below $3 a gallon for the first time since 2021, analysts said, which should boost consumer confidence during the holiday shopping season.
The national average price for a gallon of gasoline stood at $3.23 on Tuesday, down 15% since mid-September, data from the motorist group AAA showed. Lower pump prices have given American consumers some relief from inflation and left more cash for discretionary spending.
"Gas prices being down this year has allowed me to invest more into my small business than I could last year," said Macey Ropes, a tie-dye clothing store owner in Lafayette, Indiana.
Tamer fuel bills have also helped her set aside money for personal shopping and travel around the holidays, she said.
Gasoline prices averaged $3.008 a gallon in Indiana on Tuesday, almost half a dollar cheaper than last year.
Prices have softened with benchmark global oil prices, which settled on Tuesday at their lowest since July as traders worried about China's economy. Oil prices have fallen despite fresh oil supply cuts announced on Thursday by OPEC+, the Organization of the Petroleum Exporting Countries and its allies.
Global oil supplies are less strained than they were in the months following the start of the war in Ukraine.
The cost of crude is the biggest component in retail gasoline pricing. U.S. West Texas Intermediate crude futures settled at $72.32 a barrel on Tuesday, down about 10% this year.
U.S. refiners have lifted gasoline output since last year, helping to build inventories in recent months.
Total U.S. motor gasoline inventories stood at 218.18 million barrels as of Nov. 24, 2% higher than a year ago and the highest for this time of the year since 2020, according to data from the Energy Information Administration.
The national average price of gasoline is set to decline up to half a cent daily through the end of year. This could bring it below $3 a gallon for the first time since early 2021, said Andrew Gross, a spokesperson with the American Automobile Association.
Declining gasoline prices could boost the consumer confidence index, which rose for the first time in November after three consecutive months of declines.
"It is argued that gasoline rising towards $4 a gallon gasoline hurts consumer psyche, so a drop towards $3 should help keep it strong" said John Kilduff, partner at New York-based Again Capital. (Reporting by Shariq Khan; Editing by David Gregorio)