Gas Falls Below $4 a Gallon for the First Time in Months, AAA Says
The national average hit $3.94 as crude oil slid to about $90 a barrel on a seasonal shift and hopes for U.S.-Iran talks, but analysts warn the relief could reverse.
American drivers are finally getting some relief at the pump. The national average price of a gallon of regular gasoline dropped below $4 on Tuesday for the first time in months, and it stood at $3.94 on Wednesday, according to AAA.
Prices have fallen about 40 cents over the past month, with most of the drop coming in the past two weeks. Some people assumed the election had something to do with it, but Patrick De Haan, head of petroleum analysis at GasBuddy, called that a myth in his industry newsletter. "For now, it's the seasonal shift, not politics, driving the relief at the pump," he wrote.
The seasonal explanation is simple. Summer is the peak driving season, and fewer people drive in colder weather, so demand eases. Refineries also finish their annual maintenance by late fall, which adds supply. Refiners switch from summer-blend to cheaper winter-blend gasoline each year, and this year the Environmental Protection Agency and the Department of Energy moved the switch up to Sept. 1 from the usual Sept. 15, citing prices pushed higher by the war in Iran.
The biggest driver, though, is crude oil. Jorge León, head of geopolitics at Rystad Energy, said the main factor is the falling price of Brent crude, now around $90 a barrel. It is dropping because somewhat more oil is reaching market from the Middle East through pipelines, and because traders have welcomed intensifying diplomatic efforts between the United States and Iran.
León cautioned that the progress could easily be reversed. "President Trump may see further military action as a way to regain negotiating leverage before Democrats take control of Congress in January," he wrote to NPR. "If we see renewed escalation, much of last week's oil price decline could quickly reverse." Gas prices would follow. Congressional Democrats have said they support ending the war, and although their power to stop it directly is limited, they will control the power of the purse and can withhold war funding or hold up confirmations.
A return to prewar prices is a long way off even if the oil keeps getting cheaper. Jaime Brito, executive director of refining and oil markets at Dow Jones Energy, said it would take a return to normal crude production, shipping and refining across the whole supply chain. Ships that have been taking long alternative routes to avoid the Strait of Hormuz would have to go back to their original routes, and refineries would have to produce enough fuel to ease global demand and rebuild depleted stockpiles. The process could take months after a lasting peace deal.
AAA noted on its website that even at $3.94, gasoline is the most expensive it has ever been at this time of year.
