After over two years of high gasoline prices, which at one point saw the price of a gallon of regular nationwide close to $5, the median price has dropped below $3. The price is now $2.99. The trend should help the American economy, as high gas prices help trigger inflation. (See the price of gasoline through the decades.)
Are Lower Gas Prices Good News?
According to GasBuddy, gasoline prices have fallen 12 weeks in a row and are now at their lowest price this year. This is a relief for many drivers who will travel during the holiday season. Patrick De Haan, head of petroleum analysis at GasBuddy, commented, “With nearly 80,000 gas stations in the U.S. now priced below $3 per gallon, and 23 states also seeing average prices of $2.99 or less, motorists are getting substantial relief at the pump in time for the holidays.” GasBuddy collects data from 150,000 stations.
As has always been the case, gas prices are primarily influenced by oil prices. In late September, the price for a barrel of crude oil was $90. That has dropped to $70. There are several theories about the decline. Production is abundant, particularly from the United States. OPEC+ recently cut production targets, but not by much. China is the world’s largest importer of oil, and its economy has slowed.
A look at the Bureau of Labor Statistics consumer price index for October shows the effects of energy, and particularly gas, on inflation. The price of all items rose 3.2% compared to the same month last year. Gas prices dropped 6.2% over the period.
Many Americans continue to find inflation has cut their ability to spend. High interest rates, in particular, have affected them. If the Federal Reserve does not cut rates, this will remain a challenge. The price of some foods remains high. So are the prices for new and used cars. A reduction in the ability of households to spend cuts discretionary income, which is a major factor in calculations of gross domestic product.
Low gasoline prices, in a vacuum, are good news. For the broader economy, they offer a hope that inflation will continue to slow.
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