Gas prices will soon drop below $ 3 a gallon: government forecast

Relief is finally on its way for motorists who are fed up with rising gasoline prices. This year’s spike in pump prices finally appears to be over, and a new government report predicts gasoline prices will drop well below $ 3 in the new year.

The US Energy Information Administration released its near-term energy outlook on Tuesday, predicting that prices will first drop to $ 3.01 nationwide next month before averaging $ 2.88 on gallon for the remainder of 2022.

According to automotive group AAA, gasoline prices are already falling. The national average price of a gallon of regular gasoline is now $ 3.34, down 8 cents from a month ago.

“Consumers may take a break from the pumps right now, but it’s not for a very good reason,” AAA spokesman Andrew Gross said on Monday, citing economic complications from the coronavirus in the oil industry.

Yet AAA data shows gas prices are now $ 1.18 higher than they were at this time last year, when demand was down due to travel restrictions. aimed at curbing the rapidly spreading coronavirus.

What is the cause of the drop in gas prices?

The EIA attributes the upcoming free fall in gas prices to major changes in the crude oil market. The price of oil fell more than $ 11 in early December from its November average of $ 81 a barrel, the agency noted. The EIA expects crude oil prices to average $ 70 per barrel through 2022.

Like Money reported last week in the midst of falling oil prices, when crude oil becomes cheaper, gas prices follow. That’s because up to 56% of the price consumers pay at the pump goes to the wholesale price of crude oil, according to the EIA.

“It’s a very complicated environment for the entire energy industry,” Steve Nalley, EIA interim administrator, said in an announcement of the Energy Outlook Report.

But for consumers who have struggled with record inflation, it’s a welcome respite.

More money :

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Best money movements for December 2021

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