Gas prices in the United States have seen a significant decline over the weekend, providing relief for drivers just ahead of the holiday season. As of Monday, the national average for gas prices stands at $3.15 per gallon, which is 5 cents lower than the previous week and 20 cents lower than a month ago.
One of the factors contributing to this decline is the outcome of the November 30 meeting of the OPEC+ oil cartel. According to Andy Lipow, President of consulting firm Lipow Oil Associates, the subsequent drop in crude oil prices reflects OPEC+’s struggle to balance oil supply and demand, especially considering the increase in supply from the United States, Brazil, and Guyana, along with weaker demand from China.
Chinese refiners, despite experiencing an initial surge in demand following the lifting of COVID-related restrictions, have recently reduced their processing rates.
A Bloomberg survey of industry analysts and consultants suggests a decline in Chinese oil demand to approximately 500,000 barrels per day in the coming year, about a third of the demand recorded over the past year.
The gas price decline in the U.S. follows a cyclical pattern typical in previous years but absent during recent winter months.
This decline is influenced by shorter days, increasing inclement weather, and reduced driving activity during the fall and winter.
According to Devin Gladden, an AAA spokesperson, these trends typically drive down oil demand through the end of the year. Gas prices are expected to remain low until the weather warms and outdoor activity increases.
Tom Kloza, Global Head of Energy Analysis at the Oil Price Information Service, predicts that gas prices at the pump will likely dip below the $3.09 low seen in 2022 by the weekend. Over the next 60 days, consumers may see some of the lowest gas price levels since 2021.
Despite the recent decline in gas prices, unresolved geopolitical factors continue to cause concern within the market. These include Houthi militant attacks on shipping traffic in the Red Sea, tensions between Venezuela and Guyana, and the ongoing conflict in Gaza, which could potentially expand to other parts of the Middle East.
Can the situation in Israel impact gas prices?
“There was some concern that the ongoing war in the Middle East could have left the oil supply tightened … thankfully we have not seen that, and I think in the coming months it’ll be an ongoing story, but the market is less concerned now because there is at least some containment” of the conflict, Gladden said via The Hill.
During these winter months, when travel activity tends to decrease and winter fuel demand is not yet high in the Northern Hemisphere, it is unlikely that turmoil in Israel will lead to a sudden surge in crude oil prices.
Enjoy it while it lasts
While the White House has limited options to directly affect gas prices, lower gas prices could provide some relief for Americans concerned about the cost of living and potentially give a slight boost to President Biden’s approval ratings, especially after the challenges posed by high oil and gas prices in 2022 and 2023.
“I think 2022 and 2023 were tough years to be dealing with high oil prices and high gasoline and diesel prices,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service, via The Hill. “There aren’t many things that in a basket of consumer goods you can say it’s as low as in 2021.”
But, in the next 60 days, he added, consumers may see “some of the lowest levels since 2021.”
