Sep 2, 2022
After reaching new highs this year, U.S. gasoline prices have made a remarkable course correction.
In time for the long Labor Day weekend, the national average for a gallon of regular gas fell to $3.83 on Thursday, AAA reports. That’s down from $4.21 just one month ago.
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While still relatively high in some parts of the country, average gas prices have declined for 11 straight weeks and will continue to fall slightly this weekend from their summer highs, analysts say.
“We're seeing the longest drop in #gasprices since 2018,” Patrick De Haan, head of petroleum analysis, for GasBuddy tweeted Thursday. “We've now surpassed the weeks of decline compared to 2020, when the pandemic hit.”
The lower prices at the pump are giving Americans a bit of a financial break — in one area of their lives, at least. Consumers are still shelling out more for a host of other necessities, including food, clothes and housing and another interest rate hike from the Fed this month is looking likely.
Here’s how long gas prices are expected to stay low, where they’re likely to head this fall, and what could cause another spike.
Why gas prices are falling
Even though demand for gas is up slightly and supply has also tightened, AAA says, drivers can largely thank lower oil prices for today’s cheaper fuel.
Crude prices are down about 30% from March when they spiked above $120 amid the war in Ukraine and a ban on Russian imports fueled fears of supply constraints.
Oil has been falling as markets worry about a slowdown in the economy reducing demand.
On Thursday, the price of West Texas Intermediate fell to $86.61 per barrel.
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“Crude prices have declined this week amid market concerns that crude demand will fall if economic growth slows or stalls due to a recession,” AAA reports. “Crude prices will likely follow suit if demand declines due to reduced economic activity.”
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What could cause prices to surge again
Gas prices have never been so volatile, jumping from the $3 range to above $5 and now back under $4. But that doesn’t mean they stay at this level.
“While the recent drop in gas prices has been most welcomed, the issues that led to skyrocketing prices aren’t completely put to bed, and still could lead prices to eventually climb back up, should something unexpected develop,” De Haan said earlier this month.
Hurricanes, too, are a wild card when it comes to the fuel market. Should a storm knock out a refinery, supply would fall and prices could spike.
“Unexpected reductions in refinery operations because of unplanned outages — particularly those related to hurricanes on the Gulf Coast — as well as potential increases in driving activity in response to lower retail gasoline prices both present upside risks to gasoline prices,” according to an August report from the U.S. Energy Information Administration (EIA).
Where gas prices are heading
If you’re planning one last road trip before summer’s unofficial end, you definitely won’t face the kind of sticker shock you did earlier this year. But if you can wait a few months longer, your gas bill could be even lower.
Gas prices are expected to average $4.29 per gallon in the third quarter of 2022 and then fall to an average of $3.78 per gallon in the last three months of the year, according to the EIA’s latest market update.
De Haan also expects prices to continue to moderate — within reason.
“Prices by the end of the year should be under $4 a gallon, but a major hurricane that disrupts the flow of energy could really impact where we go beyond that,” he says.
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Nancy Sarnoff is a freelance contributor with Moneywise. Previously, she covered commercial and residential real estate for the Houston Chronicle where she also hosted Looped In, a podcast about the region’s growth, development and economy. Her work has been recognized by the National Association of Real Estate Editors and the Society of American Business Editors and Writers.
