US gasoline pump prices hits record low

Gasoline prices in the United States are currently at their lowest since January, and analysts predict they could drop below $3 a gallon by Christmas, a level not seen since 2021. The national average price for a gallon of gasoline was $3.23 on Tuesday, down 15% from mid-September, according to AAA data. Lower fuel costs are providing relief to American consumers amid inflation concerns, allowing for more discretionary spending during the holiday season.

The decline in gas prices is attributed to falling benchmark global oil prices, which reached their lowest point since July. Despite OPEC+ announcing fresh oil supply cuts, concerns about China’s economy and less strained global oil supplies have contributed to the drop in prices. U.S. West Texas Intermediate crude settled at $72.32 a barrel on Tuesday, down about 10% for the year.

U.S. refiners have increased gasoline output, leading to higher inventories. Total U.S. motor gasoline inventories were 2% higher than a year ago, standing at 218.18 million barrels as of November 24, the highest for this time of the year since 2020, according to the Energy Information Administration.

The national average gasoline price is expected to decrease by up to half a cent daily through the end of the year, potentially falling below $3 a gallon. This downward trend in gas prices could positively impact the consumer confidence index, which rose for the first time in November after three consecutive months of declines. Lower fuel costs are generally considered favourable for consumer sentiment, as they put more money in consumers’ pockets for other expenses.

Andrew Gross, a spokesperson with the American Automobile Association, stated that the drop in gasoline prices towards $3 a gallon should contribute to maintaining strong consumer confidence. Analysts like John Kilduff from Again Capital argue that while rising gas prices toward $4 a gallon can negatively impact consumer psyche, a decrease toward $3 should help keep it strong. This suggests that more affordable fuel costs could support consumer sentiment during the holiday shopping season.