Get ready for gas at $2.50 a gallon (or less!)

Gasoline prices are seasonal. We all know that. They rise from mid-winter into summer and fade in autumn when the summer drive ends. Also, gas refineries typically use cheaper materials to produce fuel in the colder months.

Prices are fading a lot now, and the likelihood is that most American drivers will be paying less than $3 a gallon soon, perhaps by the end of October.

And $2.50 is not out of the question – and maybe less in some parts of the country.

Here’s why.

West Texas Intermediate, the US crude benchmark, ended down 4.3% at $65.75 a barrel. This was the lowest close since August 2021. It was down 19.4% in the third quarter and 8.2% this year. The run was triggered by a new lower projection for oil demand from the Organization of the Petroleum Exporting Countries.

Currently, crude oil is about half the price of a gallon of gasoline.

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GasBuddy.com puts the national average retail price of gasoline at $3.248 per gallon. The American Automobile Association’s daily gas price report puts the average at $3.26.

AAA’s price is down 42 cents, or 11.4%, since it peaked at $3.679 on April 19. GasBuddy’s price peaked at $3.70 a day later. The peak came early and was a surprise: Earlier this year, industry watchers speculated that the average could hit $5 this summer.

Some states are seeing gas prices below $3

Both organizations agree that 11 states already enjoy sub-$3 prices – Alabama, Arkansas, Kansas, Kentucky, Louisiana, Missouri, Mississippi, Oklahoma, South Carolina, Tennessee and Texas. The average price in North Carolina is $3.

Mississippi has the lowest statewide average now at about $2.75.

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It’s not a stretch to see national averages below $3 a gallon in a month. Based on current trends, the date would be around October 14th.

The price has been above $3 for 1,217 consecutive days.

Tom Kloza, global head of energy analysis at the Oil Price Information Service, sees prices falling “a penny a day for the next 30 days.” A national average below $3 could be reached by October 3rd.

How about $2.50? This is also achievable based on price history in 2022 and 2023. Kloza agrees, getting $2.50 by Election Day, November 5th.

Could some communities see $2 gas? Maybe – but only in the states with the lowest gas prices right now, like Mississippi. Add Texas, Louisiana and Oklahoma as candidates.

The last time US prices were below $2 was between March 31, 2020 and June 5, 2020.

What could derail the gasoline price trend

Some things have to fall apart for the $2.50/gallon scenario to work.

• Times
• Geopolitics (especially the Middle East)
• OPEC, Organization of the Petroleum Exporting Countries.

Storms can cause the most problems and keep prices higher than many expect. Weather can cause most problems.

Tropical Storm Francine formed in the southern Gulf of Mexico. It is expected to become Hurricane Francine on Tuesday.

Exxon Mobil offshore platform in the Gulf of Mexico near Dauphin Island, Ala.

UCG/Getty Images

It will mainly hit the central Louisiana coast, likely Wednesday. Oil production in the vast network of offshore wells in the Gulf of Mexico is beginning to be shut down.

The storm may cause disruptions to the refinery network along the coast. About 48% of total US refinery capacity is located along the Gulf Coast.

Energy stocks fell on Tuesday as traders ignored the storm and lower crude oil.

Energy Select Sector SPDR Fund (XLE) fell 1.7% to $85.14. It is down 14% from its 52-week high of $98.97.

At this point, the storm is expected to make landfall as a Category 2 hurricane, meaning winds could exceed 100 mph (161 km/h). But that doesn’t appear to be catastrophic for oil traders, who have pushed crude oil prices below $70 a barrel since early Tuesday. So gas prices could continue to fall despite the hurricane.

More economic analysis:

• Jobs reports surprise for higher Fed rate cuts
• Jobs reports on the timing and size of the Fed’s fall interest rate cuts
• The Fed’s rate cut may not guarantee a September stock market rally

OPEC is a problem because its members want the highest oil prices possible to make the most money.

OPEC can control prices; the problem is that it has little power to punish those members who break the rules. Many OPEC members are willing to bend over prices to ensure their production is sold.

And OPEC has competition: the US is currently the world’s top oil producer.

Weak economies reduce price pressure

Furthermore, OPEC cannot control demand. The economies of large consuming countries such as China are weak and too much oil is available on global markets to keep prices high.

Finally, there is the ever-increasing availability of electric vehicles, which is reducing the demand for gasoline.

Conclusion: The trend for gasoline is lower. National average prices will likely fall below $3.

That doesn’t mean all states will see prices drop below $3. Average prices in Oregon, Idaho, Nevada and Alaska prices are over $3.60. Prices in California (especially due to taxes and special gas formulation rules), Washington and Hawaii are still over $4. But residents there will also see lower prices.

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