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The national average price of regular unleaded dipped to about $3 per gallon this week, for the first time since May 2021, according to travel website AAA. Gas prices have been on a long, slow decline this year, helped in part by lower crude oil costs and weaker fuel demand once the summer travel season ended. Given that winter tends to be a time of less driving, gas prices could slip further in coming weeks, falling below the $3 level that consumers often view as the difference between reasonable and expensive. Of course, many states are already seeing prices starting with a 2; in Oklahoma, home to the cheapest gas in the nation, the state average is just $2.53 per gallon. Diesel fuel is also down notably, now averaging $3.06 per gallon nationwide; a year ago, it was a lofty $4.09.
As long as crude oil prices remain near their recent level of about $70 per barrel, the prices at gas stations should tick down or hold fairly stable. That’s what we expect for oil, barring some sort of geopolitical crisis that curbs oil production in the Middle East or another oil-rich region of the world. However, as spring nears, look for gasoline prices to start rising again, as refiners prepare for the start of the spring and summer travel season. A major price spike is unlikely as long as oil prices behave, but expect today’s $3 gas to rise into the low to mid-$3 range when warm weather returns.
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Natural gas prices are rallying on relatively cold weather, which spells stronger demand as homeowners and businesses turn up their heat. Benchmark gas futures contracts were recently trading at $3.53 per million British thermal units, which is near their high for the year. For much of 2024, natural gas contracts were near or below $2 per MMBtu. While we don’t foresee a dramatic move higher, gas could stay elevated or rise a bit more if cold weather lasts over the heavily populated mid-Atlantic and Northeast. Fortunately for consumers, inventories of gas in underground storage are ample for this time of year, so it would take a severe and long-lasting cold snap to really strain supplies.
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