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Lee and I discussed a data point that has major economic implications. The national average price for regular gasoline has dropped to about $2.75 per gallon, a level not seen in a long time. Lee and I both agreed this is not a minor headline, but a meaningful shift for households and the broader economy.
Why gasoline matters more than most commodities
I pointed out that while markets obsess over gold, silver, or even stock prices, gasoline directly affects daily life. For the average American family, fuel costs can approach $3,000 a year. When that number falls, discretionary income rises almost immediately. Lee agreed that this shows up clearly in recent CPI data, where energy prices have been one of the few components falling sharply.
Affordability and GDP impact
We emphasized that consumer spending drives roughly 80% of U.S. GDP. Lower gasoline prices act like a tax cut, freeing up cash for other spending. Whether it is commuting, taking kids to activities, or heating homes in colder states, fuel costs touch nearly every household budget.
Regional differences matter
Lee highlighted how geography plays a major role. In much of the South, gasoline prices are already near or even below $2 per gallon, largely due to proximity to refineries and lower taxes. In contrast, prices remain well above $4 in California because of heavy state taxation. That gap has real behavioral consequences for consumers.
Implications for electric vehicles
I raised the point that falling gas prices make EVs a tougher sell. When gasoline was near $5 in 2022, the economic argument for EV adoption was compelling. At $2.75 and falling, that math changes dramatically. Lee agreed that this helps explain why EV sales remain strongest in high-price regions like California, while adoption struggles elsewhere.
Oil producers and the bigger picture
We closed by discussing how major integrated producers like Exxon Mobil can remain profitable even at much lower oil prices due to refining and chemical operations. Lower prices may also boost consumption, while OPEC+ appears cautious about increasing supply too aggressively. For now, consumers are the clear winners, even if the long-term energy transition faces new headwinds.
Transcript:
[00:00:04] Doug McIntyre: Lee, yesterday, the price of a gallon of regular gas in the United States on average dropped to 2.75.
[00:00:13] It hasn’t seen 2.75 in a long, long time. Gas buddy said that’s the fifth week in a row and gas buddy said it’s not over. It’s gonna continue to drop. crude, west Texas was at about 80 in January. The last time I looked it was at 57. Now you can say gas is driven to some extent by refineries, some extent by state taxes, but gasoline is oil driven.
[00:00:44] Don’t. Absolutely, it is. Don’t try to convince me of anything else. No, absolutely. It does. A, it does a few things and I want you to add to this list. The first one is that Americans now talk about affordability, If you look at the CPI over the last six to nine months, what’s the only major component that’s dropping fast
[00:01:08] Lee Jackson: Energy prices, fuel and
[00:01:10] Doug McIntyre: gasoline.
[00:01:11] Lee Jackson: Gasoline.
[00:01:13] Doug McIntyre: and then if you say to yourself, gasoline is about $3,000 for an average family, the annual cost of gasoline, all right. If affordability is a problem and it’s affecting your discretionary income, which affects GDP in the United States.
[00:01:30] Lee Jackson: Yeah, it does, ’cause it’s 80%.
[00:01:32] Doug McIntyre: Yeah. It’s not bad news at all that people are watching that part of their household budget drop at all.
[00:01:40] It’s huge. It’s absolutely huge. So to, to me, it’s much better for the economy than most commodity price moves. It’s nice to say gold is up and down. Gold and silver do not affect people’s monthly spending. No gasoline prices in many homes, it’s a major component of their life day in and out.
[00:02:00] Some people who take their kids to soccer, people who commute to work. I mean, all those people write, write big American ex big American Express or visa bills because of gasoline. Absolutely. The other thing that people don’t take into account is EV sales are weak right now.
[00:02:18] Lee Jackson: They are especially, for certain areas in certain companies.
[00:02:24] Doug McIntyre: If you go back, to mid 2022, gasoline was at $5. Now, if you’re trying to sell EVs, would you rather be selling to people in gases? $5. Or when it’s 2.75 and dropping?
[00:02:41] Lee Jackson: Well, I think your point is, was well grounded. And to be frank with you, I mean, I live in the south and I have for the bulk of my life and where I live here in Tupelo, Mississippi, which for those that are geographically challenged is in the
[00:02:58] upper part of the state we’re about a hundred miles from Memphis, so, which is in the southern part of Tennessee Gas here, 2.17, it’ll be under $2 here. And the thing that, the reason that’s relevant is that, in the northeast and in the east where you live, a lot of people get to work via train.
[00:03:16] So especially you go going to the city and via train and that’s common back east. But in Texas and places like that, most people drive half an hour, 40 minutes in from the suburbs, say Dallas, where I lived for 15 years. But if you live out in Plano or farther north or west in Arlington, that’s a good 20, 30 minutes every single day.
[00:03:39] And it’s, it’ll be a huge and gasoline’s cheap all through the south. Part of it is because a lot of it’s, there’s a lot of refineries down here, especially in the Texas Gulf Coast. But, but even just to get it under $3 into 2.75 is huge. and the thing that’s important for our viewers to remember is why is it still so high in California?
[00:04:03] ‘Cause they tax the hell out of it. It’s just, they’re so burdened out there with horrible debt a lot and from just ridiculous spending that, it’s still, I think, three and a half, 4, 4.50 out in certain places in California.
[00:04:18] Doug McIntyre: Oh, yeah. Yeah. It’s over four. It’s over four in good cities. it’s over four.
[00:04:22] Now, I don’t want to draw a straight line between these two things because it’s probably wouldn’t be fair, but ev sales in California are awesome when it comes to per car sold, EVs do well. Why? I think part of the reason. Just gas. The price of gas Sure. And gas taxes in California.
[00:04:44] Lee Jackson: Yeah. I would suspect you’re correct, especially if you live in a, you don’t live in LA or something like that,
[00:04:50] you have a huge drive every day. But if you live in a smaller town, or, if you live central to your work, say in San Francisco, and you live someplace like that, yeah, I think I can see that it would continue to be stronger out there. Any place where the gas prices are higher, the whole West Coast, I’m sure is one of ’em.
[00:05:12] Doug McIntyre: Well, if the American consumer needs something to offset increases in things like the price of food, at least fuel costs are dropping. And for those of us who aren’t in Mississippi and are up north in Connecticut, dropping oil means dropping my heating bills down.
[00:05:31] Lee Jackson: Oh, absolutely. Because well, heating oil’s big up there still, right?
[00:05:35] Yep. Oh, you bet. Well, I think it’s just a positive and the thing is that I’ve read different stories and work on Exxon, that they literally can make money because of their additional businesses, which of course are chemicals, refining, et cetera, et cetera, et cetera, retail, they can make money still on gas down to $30, which I was stunned by because for a lot of the people that are in the Permian, and they start to struggle at 50 and below.
[00:06:12] So when I read that on Exxon, I was like, oh my god, that these guys are in the catbird seat. for lower prices, because what lower prices will do, it will increase consumption, and the OPEC Plus really, kinda they pulled their production increases a little bit longer than they should have.
[00:06:35] And they knocked it down and the Brent pricing for them was knocked down bad, real bad. And they all of a sudden they said, whoa, let’s tap the brakes on this production increases. We’re just gonna hold where we’re at. And I think they’re gonna do that until they see prices start to at least stabilize ’cause I think they’re gonna go lower in 26, maybe a while. Yeah. So kudos to the gasoline buying car public and good luck with the electric cars, except in, California, I guess. Yep.
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