By Shariq Khan
NEW YORK (Reuters) – U.S. motorists should see gasoline prices fall below $3 a gallon for the first time in more than three years next month, shortly before they vote in November’s presidential election, analysts said this week.
Softer gasoline prices, largely the result of weaker fuel demand and falling oil prices, are a relief for consumers struggling with record high fuel costs that have fueled inflation. Lower prices could also help Vice President Kamala Harris and other Democrats combat sharp criticism from Republicans about the pain at the pump.
On Wednesday, the national average price for regular gasoline was $3.25 a gallon, down 19 cents from a month ago and 58 cents from a year ago, according to data from motoring association AAA.
The average should fall below $3 a gallon by the end of October, if not sooner, as the summer season ends and retailers start selling cheaper winter fuel in the coming weeks, said Patrick De Haan, an analyst at GasBuddy.com. In North Carolina, which was considered a swing state in the Nov. 5 presidential election, pump prices were already below $3 on Wednesday.
“Americans will certainly remember the price they see as they drive into polling stations, so this is definitely good news for Harris in her campaign for the presidency against Republican Donald Trump,” De Haan said.
Research from the Wells Fargo Investment Institute, among others, shows that US presidential approval ratings are inversely related to gasoline prices. That’s why falling prices should give Democrats a boost this election cycle, said John LaForge, head of real asset strategy at the investment advisory firm.
Presidents actually have little direct influence over gasoline prices, which move based on global supply and demand fundamentals. Prices have fallen sharply this year as demand has been weaker than expected, especially in the US and China. The global benchmark has fallen from over $90 a barrel in April to a near three-year low of less than $70 on Tuesday.
A wildcard is Hurricane Francine, which tore through the US offshore oil patch on Wednesday, pushing up oil prices by more than $2 a barrel amid fears of extended production shutdowns.
In 2022, oil prices reached record highs above $5 per gallon, mainly due to supply shocks following Russia’s invasion of Ukraine, at a time when global fuel demand soared due to the easing of COVID-era lockdowns .
Supply was more robust this year, which helped lower pump prices as refiners charged higher rates, said Brian Kessens, senior portfolio manager at investment firm Tortoise.
U.S. gasoline demand this year is expected to average 8.92 million barrels per day, about 20,000 barrels per day less than last year, the U.S. Energy Information Administration (EIA) said Tuesday. Previously, demand in 2024 was expected to match that of last year.
Yet that level represents 9% of global oil demand, making the US the world’s largest fuel consumer. That gives the dollar per gallon figure additional visibility on each government’s scorecard.
HARRIS BOOST
Republicans have repeatedly blamed President Joe Biden’s policies for the rise in gasoline prices and inflation during his time in office, but De Haan said these attacks are losing steam because of the rapid decline in pump prices.
Consumer prices rose 2.5% in the 12 months through August, the slowest year-on-year increase since February 2021, Labor Department data showed on Wednesday. The data shows gasoline prices fell 10% from a year ago, the biggest annual decline since July 2023.
Gasoline prices, as measured by the consumer price index, have not risen since April.
The impact of lower gasoline prices will likely be felt most meaningfully in swing states that will ultimately decide the election, said Tom Kloza, head of energy analysis at Oil Price International Service.
Among those states, North Carolina’s average fell to $2.983 per gallon on Wednesday, while Wisconsin was at $3.043, according to data from motoring association AAA.
Diesel prices, a less visible but arguably more important indicator of a country’s economic health, are also on a similar trajectory due to weak demand and increased supply, AAA spokesman Andrew Gross said.
Higher diesel costs, which are primarily used in the production and transportation of goods, could be passed on to consumers and raise prices for everything from eggs to televisions.
The EIA on Tuesday lowered its forecast for U.S. distillate fuel demand, including diesel and diesel, to 3.83 million barrels per day, about 1% below its previous forecast and down 2.3% from last year.
National average diesel prices fell to $3.56 per gallon on September 9, down 32 cents from the beginning of the year and the lowest level since October 2021, according to EIA data.
“Whoever the next president is, he or she will certainly benefit from lower fuel prices and severe deflation,” Kloza said.
