Gas prices below $3 a gallon are starting to appear in the US. Can they last?

The decline in US gas prices could be threatened by a tough winter.
Looking for prices to come down.
Looking for prices to come down.
Image: Andrew Kelly (Reuters)
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Gasoline prices in the US have kept up their steady decline, to the point that in some areas of the country, Americans can fill up for less than $3 a gallon.

The price contraction, which triggered a broad lift in sentiment about the economy, is threatened in various parts of the country, however.

Refinery issues on the US west coast are leading to price increases in five states, and gasoline supply is tight on the country’s east coast, notes Patrick De Haan, head of petroleum analysis at GasBuddy, in a recent blog post.

States with the lowest average prices included Texas ($3.10), Arkansas ($3.12) and Mississippi ($3.13) while states with the highest were California ($5.31), Hawaii ($5.23) and Nevada ($4.84).

Will gas prices keep falling?

A large part of why oil prices aren’t more expensive is because of China’s zero covid policy. Normally at this time, hundreds of millions of Chinese would be traveling for the Mid-Autumn Festival in September and the Golden Week holidays in October. Because of ongoing covid lockdowns, annual oil consumption for China could contract for the first time in 20 years.

The lack of demand from China could be offset by increased oil consumption from Europe, as EU states try to wean themselves from Russian energy. With Russia cutting natural gas exports to the EU in half, Europeans may have to lean more heavily on oil to heat their homes.

The 13 straight weeks of declines in the average price of gas in the US has economists predicting that the US consumer price index fell in August by 0.1% month-over-month. (The data gets released on Sept. 13.)

Meanwhile, US consumers’ expectations for inflation in the year ahead slowed in August to 5.7%, from 6.2% in July, as measured by the New York Federal Reserve Bank.