Gasoline prices in the U.S. are dropping just in time for Thanksgiving, and there is a possibility that they could go even lower for Christmas as the OPEC Plus oil cartel seems to be in disarray.
Lower prices at the pump have helped reduce the inflation rate for most of this year. This week, prices fell to levels not seen at this time of year since 2021, as per the AAA motor club, before the Russian invasion of Ukraine led to an increase in energy prices.
Tom Kloza, global head of energy analysis at Oil Price Information Service, mentioned, “For consumers it’s a terrific tailwind. 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 over a dozen states and are falling quickly 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 almost 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 exceeding 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. This should help reduce food prices since 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 had been postponed from the weekend until next Thursday. Saudi Arabia had been expected to extend its cuts in production, while pressuring other countries to show restraint as well to bolster prices. However, Nigeria and Angola are resisting and lobbying for higher production quotas.
According to Jorge León, a senior vice president at Rystad Energy, a consulting firm, “Reaching a new agreement to cut production will prove to be challenging.”
He added 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 prompted traders to bail out of crude.
Andrew Gross, a spokesman for AAA, said, “Savvy drivers will find savings on their way to a turkey dinner this year.”
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 last year and the highest number since 2005, according to the motor club.
The motor club mentioned that airfares will be slightly more expensive than last year, but otherwise, holiday travel should be cheaper. The average price for a domestic hotel stay is down 12 percent from last year, while rental car costs are 20 percent lower.
