Gasoline prices are set to drop to as low as $3.25 by the end of this year, despite the increase in oil prices, according to Patrick De Haan of GasBuddy. The price of Brent, which is currently trading above $90 a barrel, has been rising. However, US drivers can expect relief as pump prices continue to fall. The national average price for a gallon of gasoline is currently at $3.558, down 8% from last month’s peak. This translates to savings of around $5 per tank. De Haan predicts that prices could reach the low $3-range, a drop of up to 9% from current levels. This would bring gas prices close to the year’s low of $3.207 per gallon. In contrast, oil prices have increased by 10% due to geopolitical tensions and OPEC production cuts.
De Haan explains that the price of crude oil only accounts for about 55%-60% of the cost of gasoline, and fluctuations in demand can impact the relationship between oil and gas prices. He attributes the current decline in gas prices to seasonal factors, such as cooler temperatures and the switch to cheaper winter gasoline blends. Refinery issues also played a role, as higher gas prices earlier in the year led to oversupply. Speculators have adjusted their positions in response to the narrative of a gas shortage, leading to a decrease in gasoline cracks.
While the current decline in gas prices is expected to continue, future price movements could be influenced by factors such as the Israel-Hamas war and the closure of refineries like the LyondellBasell Houston refinery. Additionally, new refinery projects in Nigeria and Mexico could impact market inventories and suppress gasoline margins for a period of time. Overall, US drivers can look forward to lower prices at the pump for the remainder of the year.
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